Advanced Search
MyIDEAS: Login

CAPM Tests and Alternative Factor Portfolio Composition.Getting the Alpha’s Right

Contents:

Author Info

  • L. de Moor
  • P. Sercu

Abstract

CAPWe show that the results of a CAPM test are quite sensitive to the details of the test design. Especially crucial are the aspects related to the weight one gives to small, low-reputation stocks when constructing both the factor portfolios and the test or style portfolios whose returns are to be explained. To fit our observed returns we need to redesign the size and distress factor portfolios into two factor portfolios each, one for extremely small or distressed stocks relative to nonextreme stocks, and one for moderately small or distressed stocks versus larger or growth compamies. This alternative model does a better job in pricing stocks, both in the US and internationally, than the standard four-factor CAPM model with factor portfolios designed following Fama and French ((1992), (1993), (1995), (1996a), (1996b), (1998), (2000)), Carhart (1997), Jegadeesh and Titman (1993) and Rouwenhorst (1999).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.kuleuven.be/tem/jaargangen/2001-2010/2004/TEM2004-4/TEM_4-04_09_DE%20MOOR.pdf
Download Restriction: no

Bibliographic Info

Article provided by Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen in its journal Review of Business and Economics.

Volume (Year): XLIX (2004)
Issue (Month): 4 ()
Pages: 789-846

as in new window
Handle: RePEc:ete:revbec:20040408

Contact details of provider:
Postal: Naamsestraat 69, 3000 Leuven
Web page: http://www.econ.kuleuven.be
More information through EDIRC

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20040408. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilde Roos) The email address of this maintainer does not seem to be valid anymore. Please ask Hilde Roos to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.