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Evaluating a nonlinear asset pricing model on international data

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Author Info

  • Asgharian, Hossein

    ()
    (Department of Economics, Lund University)

  • Karlsson, Sonnie

    (Danmarks Nationalbank)

Abstract

The paper analyses the ability of a nonlinear asset pricing model suggested by Dittmar (2002) to explain the returns on international value and growth portfolios. For comparison we use some competing pricing models; such as the ICAPM, the exchange rate risk augmented ICAPM and the international two-factor model proposed by Fama and French (1998). All models are evaluated both unconditionally and conditionally. The models are evaluated by applying the Hansen and Jagannathan distance measure. We also employ several alternative measures to ensure a robust comparison of the models. We find support for the model of Dittmar (2002). Evaluated conditionally, this model successfully passes all the different diagnostic tests performed in the analysis.

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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2006:5.

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Length: 36 pages
Date of creation: 27 Feb 2006
Date of revision:
Publication status: Published as Asgharian, Hossein and Sonnie Karlsson, 'Evaluating a nonlinear asset pricing model on international data' in International Review of Financial Analysis, 2008, pages 604-621.
Handle: RePEc:hhs:lunewp:2006_005

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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Related research

Keywords: nonlinear asset pricing; international markets; Hansen and Jagannathan distance; value effect;

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References

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Cited by:
  1. Erdos, Péter & Ormos, Mihály & Zibriczky, Dávid, 2011. "Non-parametric and semi-parametric asset pricing," Economic Modelling, Elsevier, vol. 28(3), pages 1150-1162, May.

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