IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/29016.html
   My bibliography  Save this paper

Pricing Without Mispricing

Author

Listed:
  • Tobias J. Moskowitz
  • Robert F. Stambaugh

Abstract

We test whether a model could price assets if the market were efficient. Specifically, we test whether a model assigns zero alpha to a strategy that uses only decade-old information, which even an inefficient market would correctly price. Persistence in the strategy’s multifactor betas gives our test power. Multifactor betas can help capture mispricing, but persistence in those betas then leads the multifactor model to distort expected returns well after that information gets priced correctly. The CAPM passes our test, but prominent multifactor models do not.

Suggested Citation

  • Tobias J. Moskowitz & Robert F. Stambaugh, 2021. "Pricing Without Mispricing," NBER Working Papers 29016, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29016
    Note: AP
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w29016.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baba-Yara, Fahiz & Boons, Martijn & Tamoni, Andrea, 2024. "Persistent and transitory components of firm characteristics: Implications for asset pricing," Journal of Financial Economics, Elsevier, vol. 154(C).
    2. Ghazi, Soroush & Schneider, Mark, 2024. "Market value of rarity: A theory of fair value and evidence from rare baseball cards," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 318-339.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:29016. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.