A two-Factor Asset Pricing Model and the Fat Tail Distribution of Firm Sizes
A 2007 paper by Malevergne and Sornette on value investing in equities, using a linear factor model: the abstract mentions a benchmark and leaves out an out-of-sample test, transaction costs, multiple testing and the size of the universe.
“Here, we show that, even for arbitrary large economies when the distribution of the capitalization of firms is sufficiently heavy-tailed as is the case of real economies, there may exist a new source of significant systematic risk, which has been totally neglected up to now but must be priced by the market.”
AssetEquities
StrategyValue investingsize premium
TechniqueLinear factor model
GeographyEurope
Also stated: Fundamentals, benchmark
Missing from abstract: out-of-sample test, costs, multiple testing, universe
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The paper's neighbourhoodValue investing by year
FamilyValue investing106Momentum and trend following289Factor investing240Machine learning return prediction15318 more · 896
AssetEquities89
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