Enhanced Global Asset Pricing Factors

Abstract This article constructs and examines enhanced global return factors. I focus on three different enhancement approaches. First, incorporate information about the covariance structure in cross-section of stock returns. Second, employ volatility-reducing techniques time series. Third, exploit diversification benefits. form six categorical factors by aggregating from 214 characteristics. Further, diversify across The mechanisms are largely successful when jointly applied increase optimal Sharpe ratio average a factor 1.96 compared to traditional My results point importance employing efficient asset pricing studies.