Can An 'Estimation Factor' Help Explain Cross-Sectional Returns?
AbstractWe show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model using GMM and compare it to the CAPM. The results suggest that adding an 'estimation factor' to the CAPM helps explain cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium. Copyright (c) 2009 The Author Journal compilation (c) 2009 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.
Volume (Year): 36 (2009-06)
Issue (Month): 5-6 ()
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Other versions of this item:
- Lundtofte, Frederik, 2005. "Can An ”Estimation Factor” Help Explain Cross-Sectional Returns?," Working Papers 2005:18, Lund University, Department of Economics.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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