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Empirical Testing of Asset Pricing Models

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  • Bruce N. Lehmann
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    Abstract

    This essay reviews the extensive literature on empirical testing of asset pricing models. It briefly describes the kinds of asset pricing models typically tested in the literature and explicates their econometric implications, both in terms of the estimation of relevant parameters and tests of their implied restrictions. Pertinent aspects of the available data on security prices and macroeconomic variables are discussed as well. The essay concludes with the examination of selected aspects of the current empirical state of asset pricing theory.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4043.

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    Date of creation: Apr 1992
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    Handle: RePEc:nbr:nberwo:4043

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    1. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    2. Breeden, Douglas T & Gibbons, Michael R & Litzenberger, Robert H, 1989. " Empirical Tests of the Consumption-Oriented CAPM," Journal of Finance, American Finance Association, American Finance Association, vol. 44(2), pages 231-62, June.
    3. Stambaugh, Robert F., 1982. "On the exclusion of assets from tests of the two-parameter model : A sensitivity analysis," Journal of Financial Economics, Elsevier, Elsevier, vol. 10(3), pages 237-268, November.
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    5. Lo, Andrew W & MacKinlay, A Craig, 1990. "Data-Snooping Biases in Tests of Financial Asset Pricing Models," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(3), pages 431-67.
    6. Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 45(3), pages 881-98, July.
    7. Amsler, Christine E. & Schmidt, Peter, 1985. "A Monte Carlo investigation of the accuracy of multivariate CAPM tests," Journal of Financial Economics, Elsevier, Elsevier, vol. 14(3), pages 359-375, September.
    8. Jobson, J. D. & Korkie, Bob, 1982. "Potential performance and tests of portfolio efficiency," Journal of Financial Economics, Elsevier, Elsevier, vol. 10(4), pages 433-466, December.
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    16. Douglas T. Breeden & Michael R Gibbons & Robert H. Litzenberger, . "Empirical Tests of the Consumption-Oriented CAPM," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 07-89, Wharton School Rodney L. White Center for Financial Research.
    17. Kandel, Shmuel, 1984. "The likelihood ratio test statistic of mean-variance efficiency without a riskless asset," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(4), pages 575-592, December.
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    20. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(2), pages 263-86, April.
    21. Ross, Stephen A, 1978. "A Simple Approach to the Valuation of Risky Streams," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 51(3), pages 453-75, July.
    22. Gibbons, Michael R., 1982. "Multivariate tests of financial models : A new approach," Journal of Financial Economics, Elsevier, Elsevier, vol. 10(1), pages 3-27, March.
    23. Singleton, Kenneth J., 1990. "Specification and estimation of intertemporal asset pricing models," Handbook of Monetary Economics, Elsevier, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 12, pages 583-626 Elsevier.
    24. Michael Rothschild, 1985. "Asset Pricing Theories," NBER Technical Working Papers 0044, National Bureau of Economic Research, Inc.
    25. French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, Elsevier, vol. 8(1), pages 55-69, March.
    26. Douglas T. Breeden & Michael R Gibbons & Robert H. Litzenberger, . "Empirical Tests of the Consumption-Oriented CAPM," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 7-89, Wharton School Rodney L. White Center for Financial Research.
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    Cited by:
    1. MacKinlay, A. Craig, 1995. "Multifactor models do not explain deviations from the CAPM," Journal of Financial Economics, Elsevier, Elsevier, vol. 38(1), pages 3-28, May.
    2. Rossi, Francesco, 2011. "U.K. cross-sectional equity data: do not trust the dataset! The case for robust investability filters," MPRA Paper 38303, University Library of Munich, Germany, revised Nov 2011.
    3. Rossi, Francesco, 2011. "Risk components in UK cross-sectional equities: evidence of regimes and overstated parametric estimates," MPRA Paper 38682, University Library of Munich, Germany, revised 31 Mar 2012.

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