Empirical Testing Of Asset Pricing Models
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| Author | : Kenneth J. Singleton |
| Publisher | : Princeton University Press |
| Total Pages | : 497 |
| Release | : 2009-12-13 |
| Genre | : Business & Economics |
| ISBN | : 1400829232 |
Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities. Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures. As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.
| Author | : Bruce Neal Lehmann |
| Publisher | : |
| Total Pages | : 52 |
| Release | : 1992 |
| Genre | : Assets (Accounting) |
| ISBN | : |
This essay reviews the extensive literature on empirical testing of asset pricing models. It briefly describes the kinds of asset pricing models typically tested in the literature and explicates their econometric implications, both in terms of the estimation of relevant parameters and tests of their implied restrictions. Pertinent aspects of the available data on security prices and macroeconomic variables are discussed as well. The essay concludes with the examination of selected aspects of the current empirical state of asset pricing theory
| Author | : Wayne Ferson |
| Publisher | : |
| Total Pages | : 80 |
| Release | : 1992 |
| Genre | : Investments |
| ISBN | : |
| Author | : Wayne Ferson |
| Publisher | : MIT Press |
| Total Pages | : 497 |
| Release | : 2019-03-12 |
| Genre | : Business & Economics |
| ISBN | : 0262039370 |
An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
| Author | : Wayne Ferson |
| Publisher | : MIT Press |
| Total Pages | : 497 |
| Release | : 2019-03-26 |
| Genre | : Business & Economics |
| ISBN | : 0262351307 |
An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
| Author | : Lucas Ammelung |
| Publisher | : |
| Total Pages | : 62 |
| Release | : 2020-12-30 |
| Genre | : |
| ISBN | : 9783346338099 |
Bachelor Thesis from the year 2020 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Munich University of Applied Sciences, language: English, abstract: The goal of this study is thus to determine the best available asset pricing model in Germany and whether the use of pre-existing datasets, with the factors already calculated, brings results as accurate as a custom dataset. This is relevant in Germany as the CAPM is still the most commonly used way to compute the cost of equity with 34% of companies using it. Another 16% of companies are using asset pricing models with additional risk factors. To determine the answer to this, this study will look into the aforementioned three most commonly used models: the CAPM, the Fama and French three-factor model and the Carhart four-factor model. After explaining the background and functioning of the CAPM, this study will show the flaws within the model and how these flaws led to extensions of the CAPM. Each model will then be statistically analyzed with three distinct sets of data. Two of these are publicly available, while the last has been calculated for this study. Lastly, to understand how the difference in data used can influence the results from asset pricing models, the runtime and underlying factor of datasets will be modified, re-analyzed and compared to the initial results.
| Author | : Haim Levy |
| Publisher | : Cambridge University Press |
| Total Pages | : 457 |
| Release | : 2011-10-30 |
| Genre | : Business & Economics |
| ISBN | : 1139503022 |
The Capital Asset Pricing Model (CAPM) and the mean-variance (M-V) rule, which are based on classic expected utility theory, have been heavily criticized theoretically and empirically. The advent of behavioral economics, prospect theory and other psychology-minded approaches in finance challenges the rational investor model from which CAPM and M-V derive. Haim Levy argues that the tension between the classic financial models and behavioral economics approaches is more apparent than real. This book aims to relax the tension between the two paradigms. Specifically, Professor Levy shows that although behavioral economics contradicts aspects of expected utility theory, CAPM and M-V are intact in both expected utility theory and cumulative prospect theory frameworks. There is furthermore no evidence to reject CAPM empirically when ex-ante parameters are employed. Professionals may thus comfortably teach and use CAPM and behavioral economics or cumulative prospect theory as coexisting paradigms.
| Author | : James W. Kolari |
| Publisher | : Springer Nature |
| Total Pages | : 326 |
| Release | : 2021-03-01 |
| Genre | : Business & Economics |
| ISBN | : 3030651975 |
This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.
| Author | : Nataliya Polkovnichenko |
| Publisher | : |
| Total Pages | : 214 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
| Author | : Philip R. Davies |
| Publisher | : |
| Total Pages | : 119 |
| Release | : 2007 |
| Genre | : |
| ISBN | : 9780549076537 |
In the first essay I develop a Bayesian approach to test the cross-sectional predictions of the CAPM at the firm level. Using a broad cross-section of NYSE, AMEX, and NASDAQ listed stocks over the period July 1927--June 2005, I find evidence of a robust positive relation between beta and average returns. Fama and French (1993) propose two additional risk factors related to firm size and book-to-market equity. I find no evidence that these additional risk factors help to explain the cross-sectional variation in average returns. These results are consistent with the empirical predictions of the CAPM.
