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Tests of the conditional asset pricing model: further evidence from the cross-section of stock returns

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  • Stuart Hyde

    (University of Manchester, Manchester Business School, United Kingdom)

  • Mohamed Sherif

    (Department of Accountancy, Economics and Finance Riccarton, Heriot-Watt University, United Kingdom)

Abstract

We analyse the ability of the conditional asset pricing models to explain the cross-sectional variation in UK stock returns. We examine conditional versions of the Sharpe-Linter CAPM and the Fama-French three-factor model. The results indicate that the conditional single-factor model is rejected in all instances. However, there is evidence supportive of the three-factor model. A specification of this model that allows for time variation in conditional covariances, conditionally expected returns and the conditional variance of the market cannot be rejected. Copyright © 2009 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 15 (2010)
Issue (Month): 2 ()
Pages: 198-211

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Handle: RePEc:ijf:ijfiec:v:15:y:2010:i:2:p:198-211

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  1. Robert Stambaugh, . "On the Exclusion of Assets from Tests of the Two-Parameter Model: A Sensitivity Analysis," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 13-81, Wharton School Rodney L. White Center for Financial Research.
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Cited by:
  1. Lischewski, Judith & Voronkova, Svitlana, 2012. "Size, value and liquidity. Do They Really Matter on an Emerging Stock Market?," Emerging Markets Review, Elsevier, Elsevier, vol. 13(1), pages 8-25.

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