Nonparametric estimation betas in the Market Model

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Nonparametric estimation betas in the Market Model

Author Info

Mª Victoria Esteban González () (F. C.C. Económicas y Empresariales. UPV/EHU)
Susan Orbe Mandaluniz () (F. C.C. Económicas y Empresariales. UPV/EHU)

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

Victoria Esteban

Abstract

In this study an alternative nonparametric estimator to the Fama and MacBeth approach for the CAPM estimation is proposed. Betas and risk premiums are estimated simultaneously in order to increase the explanatory power of the proxy for betas. A data driven method is proposed for selecting the smoothness degrees, which are directly related to the subsample sizes. Based on this relation, the traditional estimator is obtained as a particular case. Contrary to the results obtained in other studies our empirical evidence for Spanish market data is favorable to the CAPM.

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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 200603.

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Date of creation: 10 Nov 2006
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Handle: RePEc:ehu:biltok:200603

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research
Keywords: smoothed rolling; betas; CAPM;

Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-11-18 (All new papers)
NEP-ECM-2006-11-18 (Econometrics)

References listed on IDEAS
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