Stochastic Unit Roots in the Capital Asset Pricing Model?
Evidence is provided in this article for the existence of a stochastic unit root (STUR) in a proxy for the US risk-free interest rate, in preference to a standard fixed unit root. The implications of the existence of the STUR, on estimating and testing the capital asset pricing model, are also examined through simulations. The effects of the STUR in the risk-free interest rate, on conducting unit root tests for excess market returns and estimating the betas of assets, are found to be qualitatively similar to those of the standard (fixed) unit root. Thus, this article confirms the conjecture of Markellos and Mills (2001, Applied Economics Letters, 8, pp. 499-502) on the risk-free interest rate following near-integrated processes, at least for a STUR. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2005.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 57 (2005)
Issue (Month): 4 (October)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0307-3378|
When requesting a correction, please mention this item's handle: RePEc:bla:buecrs:v:57:y:2005:i:4:p:369-389. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.