Asset Pricing in a Generalized Mean-Lower Partial Moment Framework: Theory and Evidence
A new asset pricing model that generalizes earlier results in the downside risk literature is developed and empirically tested using a multivariate approach. By specifying risk as deviations below any arbitrary target rate of return, the generalized Mean-Lower Partial Moment (MLPM) model overcomes the limited appeal of earlier formulations, and, moreover, a large class of extant pricing models using alternative risk measures (variance, semivariance, semideviation, probability of loss, etc.) becomes special cases of the new framework. Empirical tests indicate that the new model cannot be rejected against an unspecified alternative for a large set of target rates of return. The traditional CAPM, on the other hand, is rejected as a well-specified alternative. The MLPM target rates inferred from market data appear to be related to equity market mean returns rather than to the riskfree rate, the target rate that is implicit in the CAPM and explicit in earlier downside risk formulations.
Volume (Year): 24 (1989)
Issue (Month): 03 (September)
|Contact details of provider:|| Postal: |
Web page: http://journals.cambridge.org/jid_JFQ
When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:24:y:1989:i:03:p:285-311_01. 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: (Keith Waters)
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.