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Asset Pricing Models and Financial Market Anomalies

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  • Doron Avramov
  • Tarun Chordia

Abstract

This article develops a framework that applies to single securities to test whether asset pricing models can explain the size, value, and momentum anomalies. Stock level beta is allowed to vary with firm-level size and book-to-market as well as with macroeconomic variables. With constant beta, none of the models examined capture any of the market anomalies. When beta is allowed to vary, the size and value effects are often explained, but the explanatory power of past return remains robust. The past return effect is captured by model mispricing that varies with macroeconomic variables. Copyright 2006, Oxford University Press.

Suggested Citation

  • Doron Avramov & Tarun Chordia, 2006. "Asset Pricing Models and Financial Market Anomalies," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 1001-1040.
  • Handle: RePEc:oup:rfinst:v:19:y:2006:i:3:p:1001-1040
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    File URL: http://hdl.handle.net/10.1093/rfs/hhj025
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    References listed on IDEAS

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