On stable factor structures in the pricing of risk: Do time-varying betas help or hurt?

• 成果类型: Article
• 署名作者: Ghysels, E
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.224803
• 发表日期: 1998
• 页码: 549-573
• 关键词: generalized-method; Expected returns; cross-section; stock returns; WORLD PRICE; arbitrage; models; consumption; predictability; parameter

摘要

There is now considerable evidence suggesting that estimated betas of unconditional capital asset pricing models (CAPMs) exhibit statistically significant time variation. Therefore, many have advocated the use of conditional CAPMs. If we succeed in capturing the dynamics of beta risk, we are sure to outperform constant beta models. However, if the beta risk is inherently misspecified, there is a real possibility that we commit serious pricing errors, potentially larger than with a constant traditional beta model. In this paper we show that this is indeed the case, namely that pricing errors with constant traditional beta models are smaller than with conditional CAPMs.