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Are Characteristics Covariances or Characteristics?

SSRN Electronic Journal, 2020
In this article, we shed more light on the covariances versus characteristics debate by investigating the explanatory power of the instrumented principal component analysis (IPCA), recently proposed by Kelly et al. (2019). They conclude that characteristics are covariances because there is no residual return predictability from characteristics above ...
Hornuf, L., Fieberg, C.
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