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Cross-Sectional Asset Pricing Tests

Author

Listed:
  • Ravi Jagannathan
  • Ernst Schaumburg
  • Guofu Zhou

    () (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208; NBER, Cambridge, Massachusetts 02138
    Federal Reserve Bank, New York, New York 10045
    Olin School of Business, Washington University, St. Louis, Missouri 63130)

Abstract

A major problem in finance is to understand why different financial assets earn vastly different returns on average. In this paper, we survey various econometric approaches that have been developed to empirically examine various asset pricing models used to explain the difference in cross section of security returns. The approaches range from regressions to the generalized method of moments, and the associated asset pricing models are both conditional and unconditional. In addition, we review some of the major empirical studies.

Suggested Citation

  • Ravi Jagannathan & Ernst Schaumburg & Guofu Zhou, 2010. "Cross-Sectional Asset Pricing Tests," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 49-74, December.
  • Handle: RePEc:anr:refeco:v:2:y:2010:p:49-74
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-120209-133954
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    Citations

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    Cited by:

    1. Amit Goyal, 2012. "Empirical cross-sectional asset pricing: a survey," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 26(1), pages 3-38, March.
    2. Christian Fieberg & Armin Varmaz & Thorsten Poddig, 2016. "Covariances vs. characteristics: what does explain the cross section of the German stock market returns?," Business Research, Springer;German Academic Association for Business Research, vol. 9(1), pages 27-50, April.
    3. Baek, Seungho & Bilson, John F.O., 2015. "Size and value risk in financial firms," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 295-326.
    4. Robert Jarrow, 2016. "Bubbles And Multiple-Factor Asset Pricing Models," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(01), pages 1-19, February.

    More about this item

    Keywords

    factor models; stochastic discount factor; asset pricing tests;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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