Research on Replication Crisis in Finance by Theis Ingerslev Jensen and Lasse Heje Pedersen to be published in Journal of Finance
The Center for Big Data in Finance (BIGFI) is pleased to announce that a paper by BIGFI member Theis Ingerslev Jensen and BIGFI Center Director Lasse Heje Pedersen coauthored with Bryan Kelly from Yale School of Management, has been accepted for publication in the esteemed Journal of Finance. The paper addresses what drives stock returns and whether the research in this area is credible.
The study investigates whether there is a replication crisis in finance, specifically within the literature on equity factors. The researchers find that most of these factors can indeed be replicated, and work well both in the original sample period and country as well as in other countries and time-periods that differ from the original sample period. This conclusion is based on a Bayesian model of factor replication that accounts for publication bias and the testing of multiple hypothesis, and a new global dataset covering stock markets from 93 countries. The code and data are available from https://jkpfactors.com/. This research contributes to building credibility in the field of finance and will provide valuable data, code, and insights to researchers, practitioners, and the wider financial community, in the spirit of the Center for Big Data in Finance.