Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7383364 | The Quarterly Review of Economics and Finance | 2018 | 39 Pages |
Abstract
We test the beta-return relationship under the working assumption that beta is realized under constrained but innovative trading environments. Specifically, we estimate a residual beta risk as the difference between a probability-weighted realized beta and an ordinary least squares (OLS) beta, and test the beta-return relationship using daily returns on the U.S. stock market factor and 30 U.S. industries. Our estimates of the market risk premium using the cross-sectional regression (CSR) of Fama and MacBeth (1973) over a period spanning from 1926/07 to 2014/12 are in line with the central prediction of the capital asset pricing model (CAPM) that the realized return is linearly related to beta.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Bernard Ben Sita,