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Risk and Return in the Spanish Stock Market

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  • Enrique Sentana

Abstract

In this paper we use Spanish data to test the restrictions that a dynamic APT-type asset pricing model imposes on the risk-return relationship. For monthly returns on ten size-ranked portfolios and a value-weighted index, we find that those restrictions are rejected for different versions of the model over the period 1963-1992 , as well as over two subsamples. the evidence for the conditional models suggests that the Spanish stock market is segmented, which probably reflects the fact that it is only deep for a few stocks.

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  • Enrique Sentana, 1995. "Risk and Return in the Spanish Stock Market," FMG Discussion Papers dp212, Financial Markets Group.
  • Handle: RePEc:fmg:fmgdps:dp212
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    File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp212.pdf
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    1. Juan Carlos Gómez Sala & Ana María Gallego & Joaquín Marhuenda Fructuoso, 1992. "Evidencias empíricas del CAPM en el mercado español de capitales," Working Papers. Serie EC 1992-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Campbell, John Y. & Hentschel, Ludger, 1992. "No news is good news *1: An asymmetric model of changing volatility in stock returns," Journal of Financial Economics, Elsevier, vol. 31(3), pages 281-318, June.
    3. Sentana, E. & Shah, M., 1994. "An Index of Co-Movements in Financial Time Series," Papers 9415, Centro de Estudios Monetarios Y Financieros-.
    4. Ng, Victor & Engle, Robert F. & Rothschild, Michael, 1992. "A multi-dynamic-factor model for stock returns," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 245-266.
    5. Demos, Antonis & Sentana, Enrique, 1998. "An EM Algorithm for Conditionally Heteroscedastic Factor Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 357-361, July.
    6. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-1152, September.
    7. Harvey, Andrew C & Koopman, Siem Jan, 1992. "Diagnostic Checking of Unobserved-Components Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 377-389, October.
    8. King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-933, July.
    9. Harvey, Andrew & Ruiz, Esther & Sentana, Enrique, 1992. "Unobserved component time series models with Arch disturbances," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 129-157.
    10. Rubio, Gonzalo, 1988. "Further international evidence on asset pricing : The case of the Spanish capital market," Journal of Banking & Finance, Elsevier, vol. 12(2), pages 221-242, June.
    11. Begoña Basarrate Urizar & Gonzalo Rubio, 1990. "A note on the seasonality in the risk-return relationship," Investigaciones Economicas, Fundación SEPI, vol. 14(2), pages 311-318, May.
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    Cited by:

    1. Pedro L. Sánchez-Torres & Enrique Sentana, 1998. "Mean-variance-skewness analysis: an application to risk premia in the Spanish stock market," Investigaciones Economicas, Fundación SEPI, vol. 22(1), pages 5-17, January.

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