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A Non-Parametric Test of the Conditional CAPM for the Mexican Economy

Author

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  • Jorge H. del Castillo-Spíndola

    (Universidad Nacional Autónoma de México)

Abstract

Many models have been suggested to describe how investors manage risk and value risky cash flows. Among them, the most widely used is the Sharpe-Lintner-Black Capital Asset Pricing Model (CAPM). However many anomalies and evidence against this version have been presented. To assume that the CAPM holds in a conditional sense is to assume that the betas and the market risk premium vary along time. We present a test of the conditional version of the CAPM for the Mexican economy, that uses a non-parametric methodology suggested by Wang that avoids the problem of functional form misspecification of the betas of the assets.

Suggested Citation

  • Jorge H. del Castillo-Spíndola, 2006. "A Non-Parametric Test of the Conditional CAPM for the Mexican Economy," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 275-297.
  • Handle: RePEc:emx:esteco:v:21:y:2006:i:2:p:275-297
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    File URL: http://estudioseconomicos.colmex.mx/archivo/EstudiosEconomicos2006/275-297.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    CAPM; conditional mean-variance efficiency; betas of the assets; market risk premium; non-parametric testing;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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