Specification Tests of International Asset Pricing Models
- Topics:
- Investment and Capital Markets
- Tags:
- Asset,
- Asset Management,
- Asset Pricing,
- Business Operations,
- Cornell University,
- Market Integration Hypothesis,
- Model,
- Operational Planning,
- Specification
- Source:
- Cornell University
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Overview: This study evaluates the cross-sectional pricing performances of several international asset pricing models. When betas and risk premiums are constant over business cycles, none of the models can pass the specification test. By allowing time-varying betas and risk premiums in conditional models, most models can pass the specification test. Finally exchange risk premiums account for a significant part of the excess returns on international assets, and the conditional International CAPM with exchange risk performs the best. The market integration hypothesis is also supported.
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Format: PDF | Size: 494KB | Date: Feb 2003 | Pages: 49
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