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Empirical likelihood based nonparametric testing for CAPM

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Pietro Coretto

    (University of Salerno, Department of Economics and Statistics)

  • Maria Lucia Parrella

    (University of Salerno, Department of Economics and Statistics)

Abstract

The Capital Asset Pricing Model (CAPM) predicts a linear relation between assets’ return and their betas. However, there is empirical evidence that such a relationship does not necessarily occur, and in some cases it might even be nonlinear. In this paper we explore a nonparametric approach where the linear specification is tested against a nonparametric alternative. This methodology is implemented on S&P500 data.

Suggested Citation

  • Pietro Coretto & Maria Lucia Parrella, 2010. "Empirical likelihood based nonparametric testing for CAPM," Springer Books, in: Marco Corazza & Claudio Pizzi (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 103-112, Springer.
    • Handle: RePEc:spr:sprchp:978-88-470-1481-7_11
    DOI: 10.1007/978-88-470-1481-7_11
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