Name: Seminar - What Is Missing In Asset: Pricing Factor Models
Start: 2023-04-24T13:00:00+01:00
End: 2023-04-24T14:15:00+01:00
Location: Lecture Theatre 2 (Cambridge Judge Business School)

Finance and Accounting subject group seminar.

Professor Irina Zviadadze, HEC Paris

Our objective is to price the cross section of asset returns. Despite considering hundreds of systematic risk factors (“factor zoo”), factor models still have a sizable pricing error. A limitation of these models is that returns compensate only for systematic risk. We allow compensation also for unsystematic risk while imposing no arbitrage. The resulting stochastic discount factor (SDF) dominates traditional factor models in pricing assets. Empirically, about 70% of the variation in this SDF is explained by its unsystematic risk component, which is correlated with strategies reflecting market frictions and behavioural biases. Our findings provide an avenue for resolving the factor zoo.

Speaker bio

Irina Zviadadze is an Associate Professor of Finance at HEC Paris. She received a PhD in Finance in 2013 from the London Business School. Between 2013 and 2019, Irina served as an Assistant Professor of Finance at the Stockholm School of Economics, where she taught a core course on derivatives pricing and financial markets to BSc students, topics in Asset Pricing for Doctorate students, and Investments and Financial Management to students in an Executive programme. In 2019, Irina joined HEC Paris, and since then, she has taught financial economics in the HEC’s flagship Grand Ecole programme.

Irina’s research interests lie in asset pricing. She studies a risk-return tradeoff in different asset markets (equity, fixed-income, and foreign-exchange markets) and across different horizons. Her papers appeared in the Journal of Finance, Review of Financial Studies, and Journal of Financial and Quantitative Analysis; and were also presented at numerous conferences and seminars worldwide. Irina has received several research awards, including Hans Dalborg’s award for excellence in research in financial economics and the Best Young Researcher Award in Finance and Economics in 2023 by Foundation SCOR, Europlace Institute of Finance, and Institut Louis Bachelier.