The risk and return from factors

Louis K.C. Chan, Jason Karceski, Josef Lakonishok

Research output: Contribution to journalArticlepeer-review


The ability to identify which factors best capture systematic return covariation is central to applications of multifactor pricing models. This paper uses a common data set to evaluate the performance of various proposed factors in capturing return comovements. Factors associated with the market, size, past return, book-to-market, and dividend yield help explain return comovement on an out-of-sample basis (although they are not necessarily associated with large premiums in average returns). Except for the default premium and the term premium, macroeconomic factors perform poorly. We document regularities in the behavior of the more important factors, and confirm their influence in the Japanese and U.K. markets as well.

Original languageEnglish (US)
Pages (from-to)159-188
Number of pages30
JournalJournal of Financial and Quantitative Analysis
Issue number2
StatePublished - Jun 1998

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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