CAPM Over the Long Run: 1926-2001 / Andrew Ang, Joseph Chen.

Format:

Book

Author/Creator:

Ang, Andrew.

Contributor:

National Bureau of Economic Research.

Chen, Joseph.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11903.

NBER working paper series no. w11903

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

CAPM Over the Long Run

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

A conditional one-factor model can account for the spread in the average returns of portfolios sorted by book-to-market ratios over the long run from 1926-2001. In contrast, earlier studies document strong evidence of a book-to-market effect using OLS regressions in the post-1963 sample. However, the betas of portfolios sorted by book-to-market ratios vary over time and in the presence of time-varying factor loadings, OLS inference produces inconsistent estimates of conditional alphas and betas. We show that under a conditional CAPM with time-varying betas, predictable market risk premia, and stochastic systematic volatility, there is little evidence that the conditional alpha for a book-to-market trading strategy is statistically different from zero.

Notes:

Print version record

December 2005.