Adaptive Strategy of Testing Alphas in High Dimensional Linear Factor Pricing Models
Methodology
2024-04-11 v1
Abstract
In recent years, there has been considerable research on testing alphas in high-dimensional linear factor pricing models. In our study, we introduce a novel max-type test procedure that performs well under sparse alternatives. Furthermore, we demonstrate that this new max-type test procedure is asymptotically independent from the sum-type test procedure proposed by Pesaran and Yamagata (2017). Building on this, we propose a Fisher combination test procedure that exhibits good performance for both dense and sparse alternatives.
Cite
@article{arxiv.2404.06984,
title = {Adaptive Strategy of Testing Alphas in High Dimensional Linear Factor Pricing Models},
author = {Chenxi Zhao and Ping Zhao and Long Feng and Zhaojun Wang},
journal= {arXiv preprint arXiv:2404.06984},
year = {2024}
}