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A net beta test of asset pricing models

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journal contribution
posted on 26.06.2014 by Cherif Guermat, Mark Freeman
While many recent empirical studies of the CAPM have used conditional beta tests, this technique has recently been shown to have several weaknesses. Here we introduce a new, more robust, net beta test which shares a number of characteristics with conditional beta tests. The method is extended to the multi-factor case when there are mimicking portfolios of assets for the underlying factors, including the Fama-French three-factor model. We demonstrate theoretically, by simulation and using market data that the net beta estimators have lower standard errors than those generated by the standard Fama-MacBeth test. © 2009 Elsevier Inc. All rights reserved.

History

School

  • Business and Economics

Department

  • Business

Published in

International Review of Financial Analysis

Volume

19

Issue

1

Pages

1 - 9

Citation

GUERMAT, C. and FREEMAN, M., 2010. A net beta test of asset pricing models. International Review of Financial Analysis, 19 (1), pp. 1 - 9.

Publisher

© Elsevier Inc.

Version

AM (Accepted Manuscript)

Publication date

2010

Notes

This article was published in the International Review of Financial Analysis [© Elsevier Inc.] and the definitive version is available at: http://dx.doi.org/10.1016/j.irfa.2009.09.008

ISSN

1057-5219

Language

en

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