Ang, A;
Kristensen, D;
(2012)
Testing conditional factor models.
Journal of Financial Economics
, 106
(1)
pp. 132-156.
10.1016/j.jfineco.2012.04.008.
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Abstract
Using nonparametric techniques, we develop a methodology for estimating and testing conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The estimators and tests can be implemented for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios.
| Type: | Article |
|---|---|
| Title: | Testing conditional factor models |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jfineco.2012.04.008 |
| Publisher version: | http://dx.doi.org/10.1016/j.jfineco.2012.04.008 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Nonparametric estimatorTime-varying betaConditional alphaBook-to-market premiumValue and momentum |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/1377981 |
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