Most practitioners measure investment performance based on the CAPM, determining portfolio "alphas" or Sharpe Ratios. But the validity of this analysis rests on the validity of the CAPM, which assumes either normally distributed (and therefore symmetric) returns, or mean-variance preferences. Both assumptions are suspect: even if asset returns were normally distributed, the returns of options o...

Downside and asymmtric risk measurement lends itself naturally to emerging equity markets, and offer an attractive alternative to traditional techniques.We investigate which of three models best fits the equity returns of emerging markets: CAPM, the Lower Partial Moment CAPM (LPM-CAPM), and an Asymmetric Response Model (ARM), and discuss implications for investment strategies and risk managemen...

The CAPM is still considered a first-order intellectual achievement, in spite of the current thought leaders also describing it as being “empirically vacuous” (Fama and French, 2006) or that “having a low, middle or high beta does not matter; the expected return is the same” (Ross, 1993).1 In­ deed, I would say the situation is worse, as volatility and beta are generally negatively correlated w...

CAPM augmented with liquidity and size premium in the Croatian stock market Jelena Minović & Boško Živković To cite this article: Jelena Minović & Boško Živković (2014) CAPM augmented with liquidity and size premium in the Croatian stock market, Economic Research-Ekonomska Istraživanja, 27:1, 191-206, DOI: 10.1080/1331677X.2014.952107 To link to this article: http://dx.doi.org/10.1080/1331677X....

This paper stresses the importance of assessing the risk-return trade-off faced by environmental industries in financial markets. One of the most widely-used theoretical models in finance is the conditional CAPM, which describes the conditional risk-return tradeoff in financial markets, whereby both the conditional mean return and conditional beta risk are allowed to vary over time. This paper ...

In this paper, we give a uni ed approach to equilibrium asset pricing theories. We de ne a factor subspace and develop a general equilibrium model with an in nite dimensional contingent claim space which will be applied to asset pricing models. We show that there exists a minimal factor subspace F in the sense that no proper subspace of F can serve a factor subspace. We discuss how the minimal ...

This paper presents a test of multi-period asset pricing models using quarterly Philippine data. Using a consumption-based asset-pricing model, the study finds the rate of time preference to be 5.20 percent (on an annual basis). The estimated risk aversion coefficient of 0.043 seems to be on the low side when compared with estimates for other countries. Hansen's J-test finds favorable evidence ...