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Tests of Conditional Asset Pricing Models in the Brazilian Stock Market

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Author Info
BONOMO, Marco
GARCIA, René

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Abstract

In this paper, we test a version of the conditional CAPM with respect to a local market portfolio, proxied by the Brazilian stock index during the 1976-1992 period. We also test a conditional APT model by using the difference between the 30-day rate (Cdb) and the overnight rate as a second factor in addition to the market portfolio in order to capture the large inflation risk present during this period. the conditional CAPM and APT models are estimated by the Generalized Method of Moments (GMM) and tested on a set of size portfolios created from a total of 25 securities exchanged on the Brazilian markets. the inclusion of this second factor proves to be crucial for the appropriate pricing of the portfolios.

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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 1997.

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Date of creation: 1997
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Handle: RePEc:mtl:montde:1997

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Related research
Keywords: conditional CAPM; conditional APT; efficiency of markets; time-varying risk and returns;

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  1. Marcelo Savino Portugal & Angelo Marsiglia Fasolo, 2004. "Imperfect Rationality and Inflationary Inertia: A New Estimation of the Phillips Curve for Brazil," Econometric Society 2004 Latin American Meetings 5, Econometric Society. [Downloadable!]
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