Testing Conditional Factor Models / Andrew Ang, Dennis Kristensen.

Format:

Book

Author/Creator:

Ang, Andrew.

Contributor:

National Bureau of Economic Research.

Kristensen, Dennis.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17561.

NBER working paper series no. w17561

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

Using nonparametric techniques, we develop a methodology for estimating conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The tests can be performed 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.

Notes:

Print version record

November 2011.