Author： Bahri S. Saiful Leger Lawrence A.
Publisher： Routledge Ltd
ISSN： 1466-4305
Source： Applied Financial Economics, Vol.11, Iss.4, 2001-08, pp. : 411-422
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Abstract
The stability of risk factors in the UK stock market is examined over time and across stock samples. Risk factors were identified by principal components analysis (PCA) on 22 small samples of stocks, over short time horizons. Stability across samples was investigated by a second-stage PCA, to identify commonalities (referred to as 'superfactors') among the estimated principal components. Stability over time was examined by estimating the predictability of superfactor loadings and superfactor scores over 20 years. Only one stable market-wide risk factor emerged. Other components seemed to be sample-specific and unstable across time.
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