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Long-Run Evidence Using Multifactor Asset Pricing Models

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Author Info

  • Stefano D'Addona

    (University of Roma Tre)

  • Paola Brighi

    (University of Modena e Reggio Emilia)

  • Antonio Carlo Francesca Della Bina

    (University of Bologna)

Abstract

We study the pricing factor structure of Italian equity returns. Using 25 years of data, we focus on a classical four factors model. A two step empirical analysis is provided where first we estimate an unrestricted multi-factor model to test if there is any evidence of misspecification. Then, we estimate the restricted model through the Generalized Methods of Moments (GMM). We find that the market premium and the size premium for stocks are confirmed for a domestic Italian investor. On the contrary, weak evidence is found for the value premium. Finally, we highlight, that augmenting the model with a momentum factor may at least partially improve its performance.

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File URL: http://host.uniroma3.it/centri/crei/pubblicazioni/workingpapers2011/CREI_09_2011.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by CREI Università degli Studi Roma Tre in its series Working Papers with number 0911.

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Length: 40 pages
Date of creation: 2011
Date of revision: 2011
Handle: RePEc:rcr:wpaper:09_11

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Keywords: Fama-French factors; GMM; Asset Pricing; Carhart model;

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