This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Restrictions on Predictability Implied by Rational Asset Pricing Models

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Kirby, Chris

Additional information is available for the following registered author(s):

Abstract

This article shows how rational asset pricing models restrict the regression-based criteria commonly used to measure return predictability. Specifically, it invokes no-arbitrage arguments to show that the intercept, slope coefficients, and R[superscript 2] in predictive regressions must take specific values. These restrictions provide a way to directly assess whether the predictability uncovered using regression analysis is consistent with rational pricing. Empirical tests reveal that the returns on the CRSP size deciles are too predictable to be compatible with a number of well-known pricing models. However, the overall pattern of predictability across these portfolios is reasonably consistent with what we would expect under circumstances where predictability is rational. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Download Info
To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 11 (1998)
Issue (Month): 2 ()
Pages: 343-82
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:11:y:1998:i:2:p:343-82

Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Fax: 919-677-1714
Email:
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC

Order Information:
Web: http://www4.oup.co.uk/revfin/subinfo/

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marquering, W. & Verbeek, M., 2000. "The economic value of predicting stock index returns and volatility," Discussion Paper 78, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Ralph C. Allen & Jack H. Stone, 2005. "Textbook Neglect of the Constant Coefficient," Journal of Economic Education, Helen Dwight Reid Foundation, vol. 36(4), pages 379-384. [Downloadable!]
  3. Cesare Robotti, 2003. "Dynamic strategies, asset pricing models, and the out-of-sample performance of the tangency portfolio," Working Paper 2003-6, Federal Reserve Bank of Atlanta. [Downloadable!]
  4. Pierluigi Balduzzi & Cesare Robotti, 2001. "Minimum-variance kernels, economic risk premia, and tests of multi-beta models," Working Paper 2001-24, Federal Reserve Bank of Atlanta. [Downloadable!]
  5. Doron Avramov, . "Stock-Return Predictability and Model Uncertainty," Rodney L. White Center for Financial Research Working Papers 12-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
  6. Marquering, W.A. & Verbeek, M.J.C.M., 2001. "The Economic Value of Predicting Stock Index Returns and Volatility," Research Paper ERS-2001-75-F&A Revision_, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
  7. Geert Bekaert & Jun Liu, 2001. "Conditioning Information and Variance on Pricing Kernals," University of California at Los Angeles, Anderson Graduate School of Management 1009, Anderson Graduate School of Management, UCLA. [Downloadable!]
  8. Wessel Marquering, 2006. "Do consumption-based asset pricing models explain return predictability?," Applied Financial Economics, Taylor and Francis Journals, vol. 16(14), pages 1019-1027, October. [Downloadable!] (restricted)
  9. Pierluigi Balduzzi & Cesare Robotti, 2005. "Asset-pricing models and economic risk premia: a decomposition," Working Paper 2005-13, Federal Reserve Bank of Atlanta. [Downloadable!]
  10. Leonid Kogan & Raman Uppal, . "Risk Aversion and Optimal Portfolio Policies in Partial and General Equilibrium Economies," Rodney L. White Center for Financial Research Working Papers 13-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
  11. Kevin L. Reffett & Frank Schorfheide, 2000. "Evaluating Asset Pricing Implications of DSGE Models," Econometric Society World Congress 2000 Contributed Papers 1630, Econometric Society. [Downloadable!]
  12. Raymond Kan & Cesare Robotti, 2006. "Specification tests of asset pricing models using excess returns," Working Paper 2006-10, Federal Reserve Bank of Atlanta. [Downloadable!]
    Other versions:
  13. Heber Farnsworth & Wayne E. Ferson & David Jackson & Steven Todd, 2002. "Performance Evaluation with Stochastic Discount Factors," NBER Working Papers 8791, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.

This page was last updated on 2009-11-28.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.