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Adjusting the CAPM for Threshold Effects: An Application to Food and Agribusiness Stocks

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Author Info
Christine Wilson () (Department of Agricultural Economics, College of Agriculture, Purdue University)
Allen Featherstone () (Department of Agricultural Economics, Kansas State University)

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Abstract

The dynamics in stock returns and the market return for 21 food and agribusiness firms are estimated in a threshold switching-regression framework. Threshold adjustment levels and capital asset pricing model risk parameters are estimated and tested. Results indicate risk parameters differ for alternative regimes and are not constant over time. Accounting for periods of temporary disequilibrium leads to notably more stable risk measurement estimates.

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File URL: http://ageconsearch.umn.edu/bitstream/28619/1/sp060008.pdf
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Publisher Info
Paper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 06-08.

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Length: 31 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:pae:wpaper:06-08

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Related research
Keywords: CAPM Cointegration Risk Threshold

Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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