Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320308 
Year of Publication: 
2024
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 15 [Issue:] 3 [Year:] 2024 [Pages:] 817-847
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
We develop a test for deciding whether the linear spaces spanned by the factor exposures of a large cross-section of assets toward latent systematic risk factors at two distinct points in time are the same. The test uses a panel of asset returns in local windows around the two time points. The asymptotic setup is of joint type: the number of assets and the number of return observations per asset increase asymptotically while the length of both time windows shrinks. We estimate the factor exposures, up to rotation, over the two periods using classical principal component analysis and evaluate their projection discrepancy, which is rotation invariant. This projection discrepancy is then centered with one between factor exposures computed over a partition of the pooled return data into odd and even increments. We derive the limit distribution of the statistic under the null hypothesis and develop an easy-to-implement bootstrap for constructing the critical region of the test. The test is applied to intraday financial data to determine whether the linear span of assets' systematic risk exposures differ during a trading day or after a release of important economic information.
Subjects: 
Asset pricing
high-frequency data
latent factor model
nonparametric test
PCA
systematic risk
JEL: 
C51
C52
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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