Tests of the conditional asset pricing model: further evidence from the cross-section of stock returns
Article first published online: 27 AUG 2009
Copyright © 2009 John Wiley & Sons, Ltd.
International Journal of Finance & Economics
Volume 15, Issue 2, pages 198–211, April 2010
How to Cite
Hyde, S. and Sherif, M. (2010), Tests of the conditional asset pricing model: further evidence from the cross-section of stock returns. Int. J. Fin. Econ., 15: 198–211. doi: 10.1002/ijfe.400
- Issue published online: 23 MAR 2010
- Article first published online: 27 AUG 2009
- Reward-to-risk ratio;
- conditional asset pricing models;
- stock returns;
We analyse the ability of the conditional asset pricing models to explain the cross-sectional variation in UK stock returns. We examine conditional versions of the Sharpe-Linter CAPM and the Fama-French three-factor model. The results indicate that the conditional single-factor model is rejected in all instances. However, there is evidence supportive of the three-factor model. A specification of this model that allows for time variation in conditional covariances, conditionally expected returns and the conditional variance of the market cannot be rejected. Copyright © 2009 John Wiley & Sons, Ltd.