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On pricing kernels, information and risk

  • D. L. Wilcox
  • T. J. Gebbie
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    We discuss the finding that cross-sectional characteristic based models have yielded portfolios with higher excess monthly returns but lower risk than their arbitrage pricing theory counterparts in an analysis of equity returns of stocks listed on the JSE. Under the assumption of general no-arbitrage conditions, we argue that evidence in favour of characteristic based pricing implies that information is more likely assimilated by means of nonlinear pricing kernels for the markets considered.

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    File URL: http://arxiv.org/pdf/1310.4067
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    Paper provided by arXiv.org in its series Papers with number 1310.4067.

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    Date of creation: Oct 2013
    Date of revision: Oct 2013
    Handle: RePEc:arx:papers:1310.4067
    Contact details of provider: Web page: http://arxiv.org/

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