A machine learning based asset pricing factor model comparison on anomaly portfolios

We frame asset pricing linear factor models in a machine learning context and consider related comparisons of their predictive performance against ordinary least squares linear regression over a dataset of anomaly portfolios. Specific regression models involved in the comparison include regularized linear, support vector machines, neural networks, and tree based models among others. Performance metrics are presented on a model, portfolio group, and sequential basis, and the strongest predictors are recommended as alternative techniques for the problem of excess return forecasting. (C) 2021 Elsevier B.V. All rights reserved.