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Abstract Many recently proposed, seemingly different factor models are closely related. In spanning tests, the q-factor model largely subsumes the Fama–French five- and six-factor models, and the q5 model subsumes the Stambaugh–Yuan four-factor model. Their “mispricing” factors are sensitive to the construction procedure, and once replicated via the traditional approach, are close to the q-factors, with correlations of 0.8 and 0.84. Finally, consistent with the investment CAPM, valuation theory predicts a positive relation between the expected investment and the expected return.
Hou et al. (Sat,) studied this question.