The Conditional CAPM does not Explain Asset-Pricing Anamolies / Jonathan Lewellen, Stefan Nagel.

Format:

Book

Author/Creator:

Lewellen, Jonathan.

Contributor:

National Bureau of Economic Research.

Nagel, Stefan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9974.

NBER working paper series no. w9974

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CAPM.

Notes:

Print version record

September 2003.