Week 4
Empirical Asset Pricing
Data-driven finance begins: the Fama–French three-factor model, how factors are built, the 'factor zoo' problem, and modern statistical answers to it.
Week 4 materials
What we cover
- Recap: CAPM & APT — the theory we now confront with data
- The Fama–French three-factor model
- Making factors: how a return anomaly becomes a tradable factor
- The factor zoo: hundreds of published factors — how many are real?
- Feng, Giglio & Xiu (2020): taming the zoo with modern statistics
Put it to work
This week’s lab, PC Lab 3, has you build and test factor models yourself.