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Market Imperfections and the Capital Asset Pricing Model: Some Results from Aggregate UK Data

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  • Na, Seong L
  • Green, Christopher J
  • Maggioni, Paolo

Abstract

This paper studies the relationship between private sector portfolios and asset returns in the United Kingdom. Utilizing a comprehensive monthly dataset covering 1972-85, the authors test the Sharpe-Lintner-Black capital asset pricing model and investigate the role of market imperfections in explaining the rejection of this model. They find that U.K. data are not consistent with a simple model of certain market imperfections but that there is evidence that imperfections do help explain asset returns. The authors show that the rejection of the model is largely attributable to the rejection of the symmetry restrictions that are fundamental to models of consumer and investor behavior. Copyright 1995 by Royal Economic Society.

Suggested Citation

  • Na, Seong L & Green, Christopher J & Maggioni, Paolo, 1995. "Market Imperfections and the Capital Asset Pricing Model: Some Results from Aggregate UK Data," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 453-470, July.
    • Handle: RePEc:oup:oxecpp:v:47:y:1995:i:3:p:453-70
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