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Time-varying risk in the German stock market

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  • Martin Scheicher
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    Abstract

    This paper compares two specifications of the Capital Asset Pricing Model for a sample of German stocks. The specifications generate time-varying first and second moments by conditioning on past information. This explicit modelling of the time series behaviour of risk allows us to characterize the driving factors of variances and covariances of returns. In addition to a variety of diagnostic tests we evaluate the validity of the one-factor restriction in the CAPM. The main findings are that risk is time dependent and very variable and also that more than one factor is needed to fit the data set.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/135184700336964
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 6 (2000)
    Issue (Month): 1 ()
    Pages: 70-91

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    Handle: RePEc:taf:eurjfi:v:6:y:2000:i:1:p:70-91

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    Keywords: Capital Asset Pricing Model Capm; Volatility Clustering; Garch;

    References

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    Cited by:
    1. Schrimpf, Andreas & Schröder, Michael & Stehle, Richard, 2006. "Evaluating conditional asset pricing models for the German stock market," ZEW Discussion Papers 06-43, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Syed ali, Raza & Syed tehseen, jawaid & Imtiaz, arif & Fahim, qazi, 2011. "Validity of capital asset pricing model: evidence from Karachi stock exchange," MPRA Paper 32737, University Library of Munich, Germany.

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