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Cross-Sectional Returns and Fama-MacBeth Betas for S&P Indices

Author

Listed:
  • V. Reddy Dondeti
  • Jr. Carl B. McGowan

Abstract

In this paper, we use the Fama-MacBeth regression analysis methodology to determine if twenty indices for the twenty year time period from 1990 to 2009 provide a linear relationship between the index returns and index betas. The time-series of the betas of all the indices except that of Gold and Silver Index for monthly returns of one-year intervals are non-stationary. The betas in four of the five quintiles formed by sorting the indices in order of the highest to the lowest betas are found to be co-integrated. The results of the empirical tests on the gamma coefficients of the Fama-Macbeth regressions do not support the CAPM.

Suggested Citation

  • V. Reddy Dondeti & Jr. Carl B. McGowan, 2013. "Cross-Sectional Returns and Fama-MacBeth Betas for S&P Indices," Accounting and Finance Research, Sciedu Press, vol. 2(4), pages 149-149, November.
    • Handle: RePEc:jfr:afr111:v:2:y:2013:i:4:p:149
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    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
    3. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    4. Roll, Richard, 1977. "A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory," Journal of Financial Economics, Elsevier, vol. 4(2), pages 129-176, March.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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