Lu Zhang On The Evolution of Asset Pricing Models And His First Principles Approach to Improve Them

Excess Returns · Nov 21, 2021 · 55m

Asset pricing models have evolved significantly over the past several decades. From the Capital Asset Pricing Model to Fama and French's 3 Factor Model to their more recent 5 and 6 Factor Models, academic research has continued to work to improve our understanding of what drives stock prices.

But our guest this week thinks asset pricing models might need a revolution more than evolution.

We speak with Lu Zhang, who is the John W. Galbreath Chair and Professor of Finance at the Fisher College of Business at Ohio State University. He is also the creator of the Q factor model, which takes a…