Explaining the Failure of the Unconditional CAPM with the Conditional CAPM

• 成果类型: Article
• 署名作者: Hasler, Michael; Martineau, Charles
• 署名单位: University of Texas System; University of Texas Dallas; University of Toronto; University of Toronto; University Toronto Scarborough
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4381
• 发表日期: 2023
• 页码: 1835-1855
• 关键词: capital asset pricing model; ASSET PRICING TESTS

摘要

When the cost of hedging is nil, the conditional capital asset pricing model (CAPM) holds. We empirically test the conditional CAPM by regressing asset returns onto the product of their conditional betas and market returns. Estimated intercepts are not statistically different from zero, implying that the conditional CAPM successfully explains the conditional level of asset returns. Yet, unconditional betas do not explain the cross section of average asset returns; the unconditional CAPMfails. We show why and how the success of the conditional CAPM actually explains the failure of the unconditional CAPM, thereby rationalizing the coexistence of these two intriguing results.