Mark C. Freeman
A net beta test of asset pricing models
Freeman, Mark C.; Guermat, Cherif
Abstract
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.
Citation
Freeman, M. C., & Guermat, C. (2010). A net beta test of asset pricing models. International Review of Financial Analysis, 19(1), 1-9. https://doi.org/10.1016/j.irfa.2009.09.008
Journal Article Type | Article |
---|---|
Publication Date | Jan 1, 2010 |
Journal | International Review of Financial Analysis |
Print ISSN | 1057-5219 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 19 |
Issue | 1 |
Pages | 1-9 |
DOI | https://doi.org/10.1016/j.irfa.2009.09.008 |
Keywords | CAPM, factor models, capital asset pricing, conditional beta tests |
Public URL | https://uwe-repository.worktribe.com/output/982236 |
Publisher URL | http://dx.doi.org/10.1016/j.irfa.2009.09.008 |
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