Tests of the conditional asset pricing model: Further evidence from the cross-section of stock returns

Stuart Hyde, Mohamed Sherif

    Research output: Contribution to journalArticle

    Abstract

    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. © 2009 John Wiley & Sons, Ltd.

    Original languageEnglish
    Pages (from-to)198-211
    Number of pages14
    JournalInternational Journal of Finance and Economics
    Volume15
    Issue number2
    DOIs
    Publication statusPublished - Apr 2010

    Keywords

    • Conditional asset pricing models
    • Reward-to-risk ratio
    • Size
    • Stock returns
    • Value

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