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Testing Competing Factor Pricing Models

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  • Soederlind, Paul

Abstract

A GMM-based system for two different linear factor pricing models is used to test if the pricing errors are the same. Simulations demonstrate the small sample properties. As an illustration, the test is applied to the Fama-French (1996, 2015) models.

Suggested Citation

  • Soederlind, Paul, 2015. "Testing Competing Factor Pricing Models," Working Papers on Finance 1524, University of St. Gallen, School of Finance, revised May 2016.
    • Handle: RePEc:usg:sfwpfi:2015:24
    as

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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1524.pdf
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    References listed on IDEAS

    as
    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    3. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    GMM; pricing Errors; Bonferroni test; bootstrap;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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