Learning about beta
time-varying factor loadings, expected returns, and the conditional CAPM
Informazioni aggiuntive
Autori
Adrian T.,
Franzoni F.
Tipo
Articolo pubblicato in rivista scientifica
Anno
2009
Lingua
Inglese
Sommario
We amend the conditional CAPM to allow for unobservable long-run changes in risk factor loadings. In this environment, investors rationally “learn” the long-run level of factor loadings from the observation of realized returns. As a consequence of this assumption, we model conditional betas using the Kalman filter. Because of its focus on low-frequency variation in betas, our approach circumvents recent criticisms of the conditional CAPM. When tested on portfolios sorted by size and book-to-market, our learning-augmented conditional CAPM passes the specification tests.
Parole chiave
Beta, CAPM, kalman filter, anomalies, value premium
Periodico
Journal of empirical finance
Volume
16
Numero ( Mese )
4
Pagine (o numero dell’articolo)
537-556
Diffusione
Licenza
Licenza non definita
Visibilità
Pubblico
Status open access
Green
