Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7357955 | Journal of Econometrics | 2018 | 30 Pages |
Abstract
We propose a modification of the two-pass cross-sectional regression approach for estimating ex-post risk premia in linear asset pricing models, suitable for the case of large cross sections and short time series. Employing the regression-calibration method, we provide a beta correction method, which deals with the error-in-variables problem, based on which we construct an N-consistent estimator of ex-post risk premia and develop associated novel asset pricing tests. Empirically, we reject the implications of the CAPM and the Fama-French three-factor and five-factor models but also offer new evidence on the relevance of the HML factor for pricing large cross sections of individual stocks.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Soohun Kim, Georgios Skoulakis,