Fiscal flows and asset prices

Abstract This paper investigates whether incorporating daily U.S. fiscal flows improves the explanatory power of traditional asset pricing models. Using data from October 2005 to April 2024, we assess model performance through both classical alpha testing and Bayesian model comparison following the framework of Bryzgalova, Huang, and Julliard (2023). The results show that the inclusion of the fiscal flow measure reduces average alpha across a variety of test asset portfolios and consistently app