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A net beta test of asset pricing models

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journal contribution
posted on 26.06.2014, 10:50 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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