Abstract:This study quantitatively explores the linear standard capital asset pricing model (CAPM) and a non-linear CAPM by using ten US representative firms' monthly stock returns. By the maximum likelihood estimation, we derive the following useful findings. (1) First, when the stock return distribution is fat-tailed, our non-linear CAPM application is highly effective. Because our non-linear CAPM parameters very well capture the behavior of fat-tailed returns, the non-linear CAPM estimation derives more reliable bet… Show more
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