Taming the Factor Zoo: New Evidence from China

Table 3

Correlation matrix of pricing factors. This table displays the correlation matrix of mainstream pricing factors. The sample period is from July 2000 to December 2019. MKT, SMB, VMG, and PMO are market, size, value, and turnover factors in the Liu–Stambaugh–Yuan 4-factor model [15]. HML, RMW, CMA, and UMD are value, profitability, investment, and momentum factors in the Fama–French 6-factor model [10]. , , , and are size, investment, profitability, and expected growth factor in the Hou–Xue–Zhang q5-factor model [2]. MGMT and PERF are two mispricing factors in the Stambaugh–Yuan 4-factor model [21]. PEAD and FIN are two long-short horizon factors in the Daniel–Hirshleifer–Sun 3-factor model [22].

	SMB	MKT	VMG	HML	RMW	CMA	UMD	PMO					MGMT	PERF	FIN	PEAD
SMB	1.00
MKT	0.23	1.00
VMG	−0.63	−0.31	1.00
HML	−0.41	0.04	0.38	1.00
RMW	−0.62	−0.35	0.68	−0.10	1.00
CMA	0.21	0.01	−0.12	0.54	−0.59	1.00
UMD	−0.37	−0.19	0.28	−0.18	0.49	−0.30	1.00
PMO	0.04	−0.23	−0.01	−0.27	0.11	−0.18	0.08	1.00
	0.92	0.21	−0.62	−0.52	−0.49	0.05	−0.15	0.08	1.00
	0.03	−0.07	0.12	0.55	−0.37	0.89	−0.15	−0.09	−0.08	1.00
	−0.54	−0.32	0.81	−0.01	0.79	−0.34	0.57	0.08	−0.40	−0.05	1.00
	−0.33	0.00	0.34	0.85	−0.18	0.58	−0.24	−0.21	−0.48	0.60	−0.03	1.00
MGMT	0.17	−0.01	−0.08	0.34	−0.40	0.71	−0.20	−0.03	0.08	0.64	−0.19	0.43	1.00
PERF	−0.31	−0.31	0.46	−0.34	0.69	−0.43	0.73	0.17	−0.11	−0.24	0.75	−0.38	−0.19	1.00
FIN	−0.11	0.05	0.13	0.32	−0.02	0.29	−0.05	−0.10	−0.14	0.36	0.07	0.32	0.34	−0.06	1.00
PEAD	−0.26	−0.24	0.37	−0.05	0.39	−0.12	0.49	0.02	−0.12	0.04	0.52	−0.03	−0.03	0.50	0.08	1.00