The Factor Multiverse: The Role of Interest Rates in Factor Discovery
Jules H. van Binsbergen (University of Pennsylvania), et al.
September 2022
We study the importance of the decline in interest rates in the discovery of asset pricing anomalies. We investigate 153 discovered anomalies as well as 1,395 potential undiscovered anomalies and find that absent the decline in interest rates, the asset pricing literature would likely entertain a different set of anomalies today. As the decline in interest rates is not continuing, a reevaluation of relevant anomalies going forward is warranted. To this end, we use a duration-based interest rate adjustment procedure to classify anomalies into false positives, false negatives, and those robust to the effect of interest rates. Our analysis highlights the sensitivity of the factor discovery process to this specific observed economic time period.
Daily Archives: October 7, 2022
Macro Briefing: 7 October 2022
* Biden: risk of nuclear war highest since 1962 Cuban Missile Crisis
* IMF chief warns of rising recession risk for global economy
* Fed officials continue to push for higher interest rates
* Debt crisis may be brewing for developing nations
* US economy may be “rolling over,” writes economist Paul Krugman
* World currency reserves falling at fastest rate on record
* A new Covid surge may be approaching
* US jobless claims rise to 5-week high but remain historically low:
