Since the establishment of the Shanghai Stock Exchange (SHSE) in 1990 and the Shenzhen Stock Exchange (SZSE) in 1991, China’s stock markets have expanded rapidly. Although this rapid growth has attracted considerable academic interest, few studies have examined the ability of conventional financial models to predict the share price movements of Chinese stock. This gap in the literature is signi...

If asset returns have systematic skewness, expected returns should include rewards for accepting this risk. We formalize this intuition with an asset pricing model that incorporates conditional skewness. Our results show that conditional skewness helps explain the cross-sectional variation of expected returns across assets and is significant even when factors based on size and book-to-market ar...

For determining the expected return, and asset pricing, CAPM (Capital pricing model) is being used dominantly grounded on only market (systematic) risk-factor though several anomalies have been revealed in this model. Fama French (1993) addressed those developed Three-factor model by combining size value factors besides factors. Over time, Carhart (1997) has further a addressing momentum factor...

CAPM is often the method of choice among practioners for estimating the cost of equity for investment projects in developed economies. But for investment projects in emerging economies, CAPM tends to give estimates that are considered too low by experienced financial managers. Sometimes, CAPM estimates of the cost of equity for projects in emerging markets are even lower than those for comparab...

Investors in equilibrium are modeled as facing investor speci ̄c risks across the space of assets. Personalized asset pricing models re°ect these risks. Averaging across the pool of investors we obtain a market asset pricing model that re°ects market risk exposures. It is observed on invoking a law of large numbers applied to an in ̄nite population of investors that many personally relevant risk ...

Financial economists have derived equilibrium asset pricing models such as the Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965) and the consumption-oriented CAPM of Breeden (1979). Subsequent work (e.g., Black, Jensen, and Scholes 1972; Fama and MacBeth 1973; Breeden, Gibbons, and Litzenberger 1989) examined the empirical performance of unconditional versions of these asse...

This paper explores the ability of theoretically-based asset pricing models such as the CAPM and the consumption CAPM referred to jointly as the (C)CAPM to explain the cross-section of average stock returns. Unlike many previous empirical tests of the (C)CAPM, we specify the pricing kernel as a conditional linear factor model, as would be expected if risk premia vary over time. Central to our a...

No-arbitrage models are extremely flexible modelling tools, but often lack economic motivation. This paper describes an equilibrium consumption based CAPM framework based on Epstein-Zin preferences, which produces analytic pricing formulas for stocks and bonds under the assumption that macro growth rates follow affine processes. This allows the construction of equilibrium pricing formulas while...