Interpreting Factor Models
论证了简约式因子模型的检验以及“特征”与“协方差”之间的竞赛无法区分投资者信念的不同模型，并指出只要存在套利者，即使预期收益的横截面差异完全由情绪驱动，随机贴现因子仍可表示为少数主导收益来源的函数。
ABSTRACT We argue that tests of reduced‐form factor models and horse races between “characteristics” and “covariances” cannot discriminate between alternative models of investor beliefs. Since asset returns have substantial commonality, absence of near‐arbitrage opportunities implies that the stochastic discount factor can be represented as a function of a few dominant sources of return variation. As long as some arbitrageurs are present, this conclusion applies even in an economy in which all cross‐sectional variation in expected returns is caused by sentiment. Sentiment‐investor demand results in substantial mispricing only if arbitrageurs are exposed to factor risk when taking the other side of these trades.