Can An "Estimation Factor" Help Explain Cross-Sectional Returns?
Author
Summary, in English
We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model by using GMM and compare it to the CAPM. The results suggest that adding an "estimation factor" to the CAPM helps in explaining cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium.
Department/s
Publishing year
2009
Language
English
Pages
705-724
Publication/Series
Journal of Business Finance & Accounting
Volume
36
Issue
5-6
Links
Document type
Journal article
Publisher
Wiley-Blackwell
Topic
- Economics
Keywords
- equilibrium
- learning
- incomplete information
- asset pricing models
Status
Published
ISBN/ISSN/Other
- ISSN: 0306-686X