General Tests of Latent Variable Models and Mean-Variance Spanning
AbstractThe methods of Michael R. Gibbons and Wayne Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean-variance spanning generalizes G. Huberman and S. Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size-based common stock portfolios proxy for the risk factors, the authors reject the hypothesis that four of them describe the conditional expected returns of the other assets. Copyright 1993 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 48 (1993)
Issue (Month): 1 (March)
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