GMM and present value tests of the C-CAPM under Transactions Costs: Evidence from the UK stock market
AbstractIn this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. Two econometric models are used; first, Fisher’s (1994) asset pricing model is estimated by GMM, and secondly, the VAR approach proposed by Campbell and Shiller is extended to include the bid-ask spread. Overall the statistical tests are unable to reject the bid-ask spread as an independent explanatory variable in the C-CAPM. This leads to the conclusion that transactions costs should be included in asset pricing models.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 03-01.
Length: 33 pages
Date of creation: Jan 2003
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- A. Gregoriou & CHRISTOS IOANNIDIS, 2003. "GMM and present value tests of the C-CAPM under Transactions Costs: Evidence from the UK stock market," Public Policy Discussion Papers 03-01, Economics and Finance Section, School of Social Sciences, Brunel University.
- NEP-ACC-2004-07-18 (Accounting & Auditing)
- NEP-ALL-2004-07-18 (All new papers)
- NEP-FIN-2004-07-18 (Finance)
- NEP-FMK-2004-07-18 (Financial Markets)
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