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An analysis of asset pricing models using out of sample data from the NYSE: 1900-1925

Author

Listed:
  • Miguel Cantillo Simon

    (Universidad de Costa Rica)

  • Nick Wonder

    (University of Wyoming)

Abstract

This paper uses financial data from 1900 to 1925 to run out of sample tests of different asset pricing models. We find that we cannot reject the strong predictions of Sharpe’s (1964) CAPM, but that there are portfolios with significant alphas that violate Sharpe’s CAPM weak predictions. The Black (1972) version of the CAPM performs worse than Sharpe’s counterpart. We also test the Fama French Carhart framework, and find that only the market and size factors work as with modern data. The value factor is statistically insignificant, and the momentum factor, while significant, has the opposite sign of the modern momentum factor.

Suggested Citation

  • Miguel Cantillo Simon & Nick Wonder, 2019. "An analysis of asset pricing models using out of sample data from the NYSE: 1900-1925," Working Papers 201904, Universidad de Costa Rica, revised Jul 2019.
    • Handle: RePEc:fcr:wpaper:201904
    as

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    File URL: https://economia.ucr.ac.cr/sites/default/files/2021-10/An_analysis_of_Risk_and_Return_NYSE_v2.pdf
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    References listed on IDEAS

    as
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