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Title: A net beta test of asset pricing models
Authors: Guermat, Cherif
Freeman, Mark
Keywords: Factor models
Capital asset pricing
Conditional beta tests
Issue Date: 2010
Publisher: © Elsevier Inc.
Citation: GUERMAT, C. and FREEMAN, M., 2010. A net beta test of asset pricing models. International Review of Financial Analysis, 19 (1), pp. 1 - 9.
Abstract: While many recent empirical studies of the CAPM have used conditional beta tests, this technique has recently been shown to have several weaknesses. Here we introduce a new, more robust, net beta test which shares a number of characteristics with conditional beta tests. The method is extended to the multi-factor case when there are mimicking portfolios of assets for the underlying factors, including the Fama-French three-factor model. We demonstrate theoretically, by simulation and using market data that the net beta estimators have lower standard errors than those generated by the standard Fama-MacBeth test. © 2009 Elsevier Inc. All rights reserved.
Description: This article was published in the International Review of Financial Analysis [© Elsevier Inc.] and the definitive version is available at: http://dx.doi.org/10.1016/j.irfa.2009.09.008
Version: Accepted for publication
DOI: 10.1016/j.irfa.2009.09.008
URI: https://dspace.lboro.ac.uk/2134/15029
Publisher Link: http://dx.doi.org/10.1016/j.irfa.2009.09.008
ISSN: 1057-5219
Appears in Collections:Published Articles (Business School)

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