Discussion paper

DP17225 Three Common Factors

Hint: these are not the Fama-French 3 factors and they are not even spanned by the Fama-French 5 factors. More importantly, they feature superior out-of-sample pricing performance compared to standard asset pricing models. What is “common” about these factors? We identify the factor space common between individual stocks and sorted portfolios - neither affected by time-varying betas nor by the sorting characteristics.


Andreou, E, P Gagliardini, E Ghysels and M Rubin (2022), ‘DP17225 Three Common Factors‘, CEPR Discussion Paper No. 17225. CEPR Press, Paris & London. https://cepr.org/publications/dp17225