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| Format: | Preprint |
| Veröffentlicht: |
2026
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| Schlagworte: | |
| Online-Zugang: | https://arxiv.org/abs/2601.10732 |
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| _version_ | 1866908769367097344 |
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| author | Lee, Chorok |
| author_facet | Lee, Chorok |
| contents | We document regime-dependent predictive structure between equity factors using 35 years of Fama-French data (1990-2024). We find that Value (HML) Granger-causes Size (SMB) during crisis regimes (p < 1e-4, 9-day lag) but not during normal conditions, validating across 5 of 6 historical stress events (2008, 2011, 2015, 2018, 2020). Regimes are identified via a Student-t HMM, which detects moderate crises such as 2011 (69%) that Gaussian models miss entirely (0%). Although the relationship does not yield trading profits, the 9-day lead time may support risk management decisions. We note that Granger causality implies temporal precedence, not structural causality, and that common drivers could explain the pattern; our economic interpretation is a hypothesis rather than a verified mechanism. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2601_10732 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Regime-Dependent Predictive Structure Between Equity Factors: Evidence from Granger Causality Lee, Chorok Risk Management Statistical Finance We document regime-dependent predictive structure between equity factors using 35 years of Fama-French data (1990-2024). We find that Value (HML) Granger-causes Size (SMB) during crisis regimes (p < 1e-4, 9-day lag) but not during normal conditions, validating across 5 of 6 historical stress events (2008, 2011, 2015, 2018, 2020). Regimes are identified via a Student-t HMM, which detects moderate crises such as 2011 (69%) that Gaussian models miss entirely (0%). Although the relationship does not yield trading profits, the 9-day lead time may support risk management decisions. We note that Granger causality implies temporal precedence, not structural causality, and that common drivers could explain the pattern; our economic interpretation is a hypothesis rather than a verified mechanism. |
| title | Regime-Dependent Predictive Structure Between Equity Factors: Evidence from Granger Causality |
| topic | Risk Management Statistical Finance |
| url | https://arxiv.org/abs/2601.10732 |