o:28259 Can a dynamic correlation factor improve the pricing of industry portfolios? en Abstract: We investigate whether a common trait shared by the major price patterns can be used to characterize the average returns of industry portfolios. We use a factor exploiting the premium induced by stocks with low and unstable correlations with the market and include it in the standard asset pricing models. The factor reduces the magnitude of alphas in these models and universally improves the description of the industry returns as measured by the GRS statistics. The finding is robust across different industry divisions and portfolio weightings. Funding text: The author acknowledges the financial support of the Ministry of Education, Science and Technological Development of the Republic of Serbia . The usual disclaimer applies. Keywords: Asset pricing; Dynamic correlations; Excess returns; Factor models; Industry portfolios 1552099 10.1016/j.frl.2022.103626 2023-03-16T17:25:39.507Z 44 no 46 Miloš Božović Univerzitet u Beogradu Ekonomski fakultet 1544295 0000-0002-5087-1977 application/pdf 550126 https://phaidrabg.bg.ac.rs/o:28259 no yes 18 70 92000001 11A03 Finance Research Letters 53 May 103626 2023