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Testing the Capital Asset Pricing Model Efficiently under Elliptical Symmetry: A Semiparametric Approach

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  • Douglas J Hodgson
  • Oliver Linton
  • Keith Vorkink

Abstract

Adaptive estimation; capital asset pricing model; efficiency

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File URL: http://sticerd.lse.ac.uk/dps/em/em398.pdf
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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Econometrics Paper Series with number /2000/398.

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Date of creation: Jul 2000
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Handle: RePEc:cep:stiecm:/2000/398

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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Keywords: Adaptive estimation; capital asset pricing model; efficiency;

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References

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  1. Wesselman, A. M. & Van Praag, B. M. S., 1987. "Elliptical regression operationalized," Economics Letters, Elsevier, vol. 23(3), pages 269-274.
  2. Fan, Yanqin, 1994. "Testing the Goodness of Fit of a Parametric Density Function by Kernel Method," Econometric Theory, Cambridge University Press, vol. 10(02), pages 316-356, June.
  3. Hodgson, D.J., 1997. "Semiparametric Efficient Estimation in Time Series," RCER Working Papers 442, University of Rochester - Center for Economic Research (RCER).
  4. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
  5. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  6. Douglas J. Hodgson & Keith Vorkink, 2001. "Efficient Estimation of Conditional Asset Pricing Models," Cahiers de recherche CREFE / CREFE Working Papers 144, CREFE, Université du Québec à Montréal.
  7. Hardle, W., 1992. "Applied Nonparametric Methods," Papers 9206, Tilburg - Center for Economic Research.
  8. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
  9. Gibbons, Michael R., 1982. "Multivariate tests of financial models : A new approach," Journal of Financial Economics, Elsevier, vol. 10(1), pages 3-27, March.
  10. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-52, September.
  11. Oliver Linton, 1993. "Second Order Approximation in the Partially Linear Regression Model," Cowles Foundation Discussion Papers 1065, Cowles Foundation for Research in Economics, Yale University.
  12. Owen, Joel & Rabinovitch, Ramon, 1983. " On the Class of Elliptical Distributions and Their Applications to the Theory of Portfolio Choice," Journal of Finance, American Finance Association, vol. 38(3), pages 745-52, June.
  13. Hodgson, D.J., 1995. "Adaptive Estimation of Cointegrating Regressions with ARMA Errors," RCER Working Papers 408, University of Rochester - Center for Economic Research (RCER).
  14. repec:cup:etheor:v:10:y:1994:i:2:p:316-56 is not listed on IDEAS
  15. Robinson, Peter M, 1988. "The Stochastic Difference between Econometric Statistics," Econometrica, Econometric Society, vol. 56(3), pages 531-48, May.
  16. Davidson, Russell & MacKinnon, James G, 1998. "Graphical Methods for Investigating the Size and Power of Hypothesis Tests," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(1), pages 1-26, January.
  17. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
  18. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  19. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
  20. repec:cup:etheor:v:9:y:1993:i:4:p:539-69 is not listed on IDEAS
  21. Linton, Oliver, 1993. "Adaptive Estimation in ARCH Models," Econometric Theory, Cambridge University Press, vol. 9(04), pages 539-569, August.
  22. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
  23. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  24. James Tobin, 1956. "Liquidity Preference as Behavior Towards Risk," Cowles Foundation Discussion Papers 14, Cowles Foundation for Research in Economics, Yale University.
  25. repec:cup:etheor:v:11:y:1995:i:5:p:818-87 is not listed on IDEAS
  26. Hodgson, Douglas J., 1998. "Adaptive Estimation Of Error Correction Models," Econometric Theory, Cambridge University Press, vol. 14(01), pages 44-69, February.
  27. MacKinlay, A. Craig, 1987. "On multivariate tests of the CAPM," Journal of Financial Economics, Elsevier, vol. 18(2), pages 341-371, June.
  28. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
  29. Amsler, Christine E. & Schmidt, Peter, 1985. "A Monte Carlo investigation of the accuracy of multivariate CAPM tests," Journal of Financial Economics, Elsevier, vol. 14(3), pages 359-375, September.
  30. Jeganathan, P., 1995. "Some Aspects of Asymptotic Theory with Applications to Time Series Models," Econometric Theory, Cambridge University Press, vol. 11(05), pages 818-887, October.
  31. Berk, Jonathan B., 1997. "Necessary Conditions for the CAPM," Journal of Economic Theory, Elsevier, vol. 73(1), pages 245-257, March.
  32. Chamberlain, Gary, 1983. "A characterization of the distributions that imply mean--Variance utility functions," Journal of Economic Theory, Elsevier, vol. 29(1), pages 185-201, February.
  33. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
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Citations

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Cited by:
  1. Marie-Claude Beaulieu & Jean-Marie Dufour & Lynda Khalaf, 2005. "Exact Multivariate Tests of Asset Pricing Models with Stable Asymmetric Distributions," CIRANO Working Papers 2005s-03, CIRANO.
  2. Rombouts, Jeroen V. K. & Hafner, Christian M., 2004. "Semiparametric multivariate volatility models," Papers 2004,14, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  3. Fernando A. Quintana & Pilar L. Iglesias & Manuel Galea-Rojas, 2005. "Bayesian robust estimation of systematic risk using product partition models," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(5), pages 313-320, September.
  4. Gabriele Fiorentini & Enrique Sentana, 2007. "On the efficiency and consistency of likelihood estimation in multivariate conditionally heteroskedastic dynamic regression models," Working Paper Series 38-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  5. Guermat, Cherif & Freeman, Mark C., 2010. "A net beta test of asset pricing models," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 1-9, January.
  6. Asimit, Alexandru V. & Jones, Bruce L., 2007. "Extreme behavior of bivariate elliptical distributions," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 53-61, July.
  7. Douglas Hodgson & Barrett Slade & Keith Vorkink, 2006. "Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 151-168, March.
  8. Douglas J. Hodgson & Oliver Linton & Keith Vorkink, 2004. "Testing forward exchange rate unbiasedness efficiently: a semiparametric approach," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 325-353, November.
  9. Hodgson, Douglas J & Vorkink, Keith P, 2003. "Efficient Estimation of Conditional Asset-Pricing Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 269-83, April.
  10. Enrique Sentana, 2008. "The Econometrics Of Mean-Variance Efficiency Tests: A Survey," Working Papers wp2008_0807, CEMFI.
  11. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
  12. Beaulieu, Marie-Claude & Dufour, Jean-Marie & Khalaf, Lynda, 2010. "Asset-pricing anomalies and spanning: Multivariate and multifactor tests with heavy-tailed distributions," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 763-782, September.
  13. Vitali Alexeev & Alex Maynard, 2010. "Localized Level Crossing Random Walk Test Robust to the Presence of Structural Breaks," Working Papers 1001, University of Guelph, Department of Economics and Finance.
  14. Sakhanenko, Lyudmila, 2008. "Testing for ellipsoidal symmetry: A comparison study," Computational Statistics & Data Analysis, Elsevier, vol. 53(2), pages 565-581, December.

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