{"id":18785,"date":"2025-12-01T13:17:01","date_gmt":"2025-12-01T19:17:01","guid":{"rendered":"https:\/\/uwm.edu\/business\/?post_type=tribe_events&#038;p=18785"},"modified":"2025-12-01T13:17:01","modified_gmt":"2025-12-01T19:17:01","slug":"broad-market-factor","status":"publish","type":"tribe_events","link":"https:\/\/uwm.edu\/business\/event\/broad-market-factor\/","title":{"rendered":"A Tale of Two Market Returns: The Broad Market Factor and The Idiosyncratic Financial Factor"},"content":{"rendered":"<p><em>Part of the Lubar Research Seminar Series<\/em><\/p>\n<p><em><strong>Speaker:\u00a0<\/strong><\/em><strong> Johnathan Loudis, University of Notre Dame<br \/>\n<\/strong><\/p>\n<p class=\"elementtoproof\" style=\"margin-bottom: 8.0pt;text-align: justify\">We construct a broad market factor (BMF) which reflects the value-weighted return on all firms in the US economy (public and private). The BMF differs from the standard value-weighted market factor (VMF), the value-weighted return on public firms in the US economy. The difference between the VMF and the BMF is the idiosyncratic financial factor (IFF): the IFF carries no risk premium and is uncorrelated with all macroeconomic proxies for investor marginal utility we consider. Consistent with a model featuring selection into public markets, we provide evidence that market risk is underestimated when measured with respect to the VMF compared to the BMF for most assets, and that using the BMF in place of the VMF resolves the size anomaly and renders size factors redundant in standard multi-factor models. Moreover, the BMF implies a substantially stronger intertemporal risk-return tradeoff. The IFF adds unpriced risk to the VMF, distorting both cross-sectional and time-series estimates of exposure to priced market risk. Thus, we provide both theoretical and empirical evidence for how the IFF explains three long-standing asset pricing \u201cpuzzles\u201d: 1) the CAPM underestimates discount rates for most assets, 2) the size anomaly, and 3) the weak intertemporal risk-return relation.<\/p>\n<p><strong>About the Speaker:<\/strong><br \/>\nJohnathan Loudis is an Assistant Professor of Finance at the University of Notre Dame. His research focuses on empirical asset pricing, asset pricing theory, and macro-finance. He received his PhD in financial economics from the University of Chicago through a joint degree program between the Booth School of Business and the Kenneth C. Griffin Department of Economics. Johnathan also holds masters degrees in economics from the University of Chicago and materials science from Dartmouth College.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Part of the Lubar Research Seminar Series Speaker:\u00a0 Johnathan Loudis, University of Notre Dame We construct a broad market factor (BMF) which reflects the value-weighted return on all firms in the US economy (public and private). The BMF differs from &hellip;<\/p>\n","protected":false},"author":82,"featured_media":18184,"template":"","meta":{"_tribe_events_status":"","_tribe_events_status_reason":"","_tribe_events_is_hybrid":"","_tribe_events_is_virtual":"","_tribe_events_virtual_video_source":"","_tribe_events_virtual_embed_video":"","_tribe_events_virtual_linked_button_text":"","_tribe_events_virtual_linked_button":"","_tribe_events_virtual_show_embed_at":"","_tribe_events_virtual_show_embed_to":[],"_tribe_events_virtual_show_on_event":"","_tribe_events_virtual_show_on_views":"","_tribe_events_virtual_url":"","footnotes":"","uwm_wg_additional_authors":[]},"tags":[],"tribe_events_cat":[63],"class_list":["post-18785","tribe_events","type-tribe_events","status-publish","has-post-thumbnail","hentry","tribe_events_cat-research-seminar-series","cat_research-seminar-series"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Lubar College of Business<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/uwm.edu\/business\/event\/broad-market-factor\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Tale of Two Market Returns: The Broad Market Factor and The Idiosyncratic Financial Factor\" \/>\n<meta property=\"og:description\" content=\"Part of the Lubar Research Seminar Series Speaker:\u00a0 Johnathan Loudis, University of Notre Dame We construct a broad market factor (BMF) which reflects the value-weighted return on all firms in the US economy (public and private). The BMF differs from &hellip;\" \/>\n<meta property=\"og:url\" content=\"https:\/\/uwm.edu\/business\/event\/broad-market-factor\/\" \/>\n<meta property=\"og:site_name\" content=\"Lubar College of Business\" \/>\n<meta property=\"og:image\" content=\"https:\/\/uwm.edu\/business\/wp-content\/uploads\/sites\/554\/2025\/08\/world-image.gif\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"400\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/gif\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/\",\"url\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/\",\"name\":\"A Tale of Two Market Returns: The Broad Market Factor and The Idiosyncratic Financial Factor - Lubar College of Business\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/uwm.edu\\\/business\\\/wp-content\\\/uploads\\\/sites\\\/554\\\/2025\\\/08\\\/world-image.gif\",\"datePublished\":\"2025-12-01T19:17:01+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/#primaryimage\",\"url\":\"https:\\\/\\\/uwm.edu\\\/business\\\/wp-content\\\/uploads\\\/sites\\\/554\\\/2025\\\/08\\\/world-image.gif\",\"contentUrl\":\"https:\\\/\\\/uwm.edu\\\/business\\\/wp-content\\\/uploads\\\/sites\\\/554\\\/2025\\\/08\\\/world-image.gif\",\"width\":800,\"height\":400,\"caption\":\"world image\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/event\\\/broad-market-factor\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/uwm.edu\\\/business\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Events\",\"item\":\"https:\\\/\\\/uwm.edu\\\/business\\\/events\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"A Tale of Two Market Returns: The Broad Market Factor and The Idiosyncratic Financial Factor\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#website\",\"url\":\"https:\\\/\\\/uwm.edu\\\/business\\\/\",\"name\":\"Lubar College of Business\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/uwm.edu\\\/business\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#organization\",\"name\":\"University of Wisconsin - Milwaukee\",\"url\":\"https:\\\/\\\/uwm.edu\\\/business\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/uwm.edu\\\/business\\\/wp-content\\\/uploads\\\/sites\\\/554\\\/2020\\\/11\\\/uwm-seo-logo.jpg\",\"contentUrl\":\"https:\\\/\\\/uwm.edu\\\/business\\\/wp-content\\\/uploads\\\/sites\\\/554\\\/2020\\\/11\\\/uwm-seo-logo.jpg\",\"width\":225,\"height\":224,\"caption\":\"University of Wisconsin - Milwaukee\"},\"image\":{\"@id\":\"https:\\\/\\\/uwm.edu\\\/business\\\/#\\\/schema\\\/logo\\\/image\\\/\"}}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Lubar College of Business","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/uwm.edu\/business\/event\/broad-market-factor\/","og_locale":"en_US","og_type":"article","og_title":"A Tale of Two Market Returns: The Broad Market Factor and The Idiosyncratic Financial Factor","og_description":"Part of the Lubar Research Seminar Series Speaker:\u00a0 Johnathan Loudis, University of Notre Dame We construct a broad market factor (BMF) which reflects the value-weighted return on all firms in the US economy (public and private). 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