Author: Jing WangPublisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 206
Book Description
Tests of Conditional Asset Pricing Models
Author: Jing WangPublisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 206
Book Description
Tests of Conditional Asset Pricing Models
Author: Ching WangPublisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 103
Book Description
A Dynamic Test of Conditional Asset Pricing Models
Author: Daniele BianchiPublisher:
ISBN:
Category :
Languages : en
Pages : 42
Book Description
I use Bayesian tools to develop a dynamic testing methodology for conditional factor pricing models, in which time-varying betas, idiosyncratic risks, and factors risk premia are jointly estimated in a single step. Based on this framework, I test over fifty years of post-war monthly data some of the most common factor pricing models on size, book-to-market, and momentum deciles portfolios, both in the time series and in the cross section. The empirical results show that, a conditional specification of the recent five-factor model of Fama and French (2015) outperforms a set of theory-based competing linear pricing models along several dimensions.
Linear Approximations and Tests of Conditional Pricing Models
Author: Michael W. BrandtPublisher:
ISBN:
Category :
Languages : en
Pages : 57
Book Description
If a nonlinear risk premium in a conditional asset pricing model is approximated with a linear function, as is commonly done in empirical research, the fitted model is misspecified. We use a generic reduced-form model economy with moderate risk premium nonlinearity to examine the size of the resulting misspecification-induced pricing errors. Pricing errors from moderate nonlinearity can be large, and a version of a test for nonlinearity based on risk premiums rather than pricing errors has reasonable power properties after properly controlling for the size of the test. We conclude by examining the importance of moderate nonlinearity in the context of the investment-specific technology shock models of Papanikolaou (2011) and Kogan and Papanikolaou (2014).
Testing Conditional Asset Pricing Models Using a Markov Chain Monte Carlo Approach
Author: Manuel AmmannPublisher:
ISBN:
Category :
Languages : en
Pages : 41
Book Description
We propose a new approach for the estimation of conditional asset pricing models based on a Markov Chain Monte Carlo (MCMC) approach. In contrast to existing approaches, it is truly conditional because the assumption that time variation in betas is driven by a set of conditioning variables is not necessary. Moreover, the approach has exact finite sample properties and accounts for errors-in-variables in a one-step estimation procedure. Using Samp;P 500 panel data, we analyze the empirical performance of the CAPM and the Fama and French (1993) three-factor model. We find that time-variation of betas in the CAPM and the time variation of the coefficients for the size factor (SMB) and the distress factor (HML) in the three-factor model improve the empirical performance by a similar amount. Therefore, our findings are consistent with time variation of firm-specific exposure to market risk, systematic credit risk and systematic size effects. However, a Bayesian model comparison trading off goodness of fit and model complexity indicates that the conditional CAPM performs best, followed by the conditional three-factor model, the unconditional CAPM, and the unconditional three-factor model.
Tests of Conditional Asset Pricing Models on Finnish Stock Return Data Using Latent Variables
Author: Mats HanssonPublisher:
ISBN: 9789515554925
Category : Capital assets pricing model
Languages : en
Pages : 15
Book Description
Conditional Asset Pricing with a Large Information Set
Author: Emanuel MoenchPublisher:
ISBN:
Category :
Languages : en
Pages : 38
Book Description
Dynamic factors summarize the information in a large number of variables and are therefore intuitively appealing proxies for the information set available to investors. This paper demonstrates that conditioning on dynamic factors instead of commonly used instruments substantially reduces the pricing errors implied by conditional models. Dynamic factors are further shown to exhibit incremental explanatory power over benchmark conditioning variables. The results withstand a number of robustness tests and carry important implications for the specification of conditional asset pricing models in applied research and practice.
Tests of the Conditional Asset Pricing Model
Author: Stuart HydePublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
We investigate the relationship between consumption and the term structure using U.K. interest rate data. We demonstrate that the term structure contains information about future economic activity as implied by the benchmark time separable power utility consumption based capital asset pricing model (C-CAPM) since the yield spread has forecasting power for future consumption growth. Further, we analyze the ability of this benchmark and two alternative models which adopt utility functions characterized by non-separability, namely, the extension to the habit formation model of Campbell and Cochrane (1999) proposed by Wachter (2006) and the housing C-CAPM proposed by Piazzesi et al. (2007). Our findings are supportive of the habit formation specification of Wachter (2006), other models fail to yield economically plausible parameter values.
Testing Asset Pricing Models with Unconditional and Conditional Alphas and Betas
Author: Niels VeldhuisPublisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 62
Book Description
Author: