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Sebastien Betermier: Hedging, Sentiment, and the Cross-Section of Equity Premia (EP.196)

The Rational Reminder Podcast

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How Does the Fama French Five Factor Model Explain the Cross Section of Returns?

The investor characteristic model is based on firm characteristics as opposed to investor characteristics. It explains more than two thirds of the tilt of these portfolios away from market, according to Unti's research. The age and wealth factors deliver but one % per month, which is large it about 12 % per year. Most of it is not explained by capen actually.

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