Decomposing the bias in time-series estimates of CAPM betas

Malloch, Hamish; Philip, Richard; Satchell, Stephen

doi:10.1080/00036846.2016.1156233

Cited by 2 publications

(2 citation statements)

References 13 publications

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“…This has been examined first by Black, Jensen and Scholes (1972) and subsequently by Blume and Friend (1973), Fama and Macbeth (1973) and Kon and Lau (1979). The biases in betas and by extension alphas estimated by CAPM-based models are inherent in models themselves (Malloch, Philip, & Satchell, 2016). Due to this, the validity of the benchmark portfolio of equivalent risk against which the fund returns are compared becomes suspect.…”

Section: Literature Surveymentioning

confidence: 99%

Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India

Agarwal

Pradhan

2018

Journal of Emerging Market Finance

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In contrast to developed countries, Indian capital markets do not exhibit strong efficiency and therefore it appears possible that fund managers beat the benchmarks. We examine the existence of superior performance of open-ended equity mutual funds in India with various models including traditional Capital Asset Pricing Model (CAPM)-based as well as recent Fama–French–Carhart (FFC)-factors-based models. We use a survivorship-bias free database including all schemes since inception till recently. We found evidence of stock picking and timing abilities in Indian fund managers. Our results are robust to changes in benchmarks, return frequency, and effects of heteroscedasticity and autocorrelation (HAC).

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Section: Literature Surveymentioning

confidence: 99%

Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India

Agarwal

Pradhan

2018

Journal of Emerging Market Finance

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“…The result is the underestimation of the market risk premium and overestimation of the other risk premiums (Shanken, 1992;Kim, 1995). Alternative methods of estimations to overcome the EIV problem have been proposed by Gibbons (1982), Shanken (1992), Kim (1995) and Malloch, Philip and Satchell (2016).…”

Section: Criticisms On Capm and Empirical Testsmentioning

confidence: 99%

Testing the Validity of Conditional Four Moment Capital Asset Pricing Model: Empirical Evidence from the Colombo Stock Exchange

Nishantha¹

2018

Staff Studies

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The Capital Asset Pricing Model (CAPM) is one of the most used model in finance during the last five decades. This is despite heavy criticism against it along with an ongoing debate among academia about the empirical validity of the model. Three major extensions to the conventional model have been suggested; higher-moment CAPM, multi-factor model and conditional CAPM. All these models have shown mixed results in empirical studies. In the recent past, these extensions are integrated and tested for empirical validity and show some positive results (Vendrame, Tucker & Guermat, 2016). In this study, the empirical validity of conditional four-moment CAPM is tested on the Colombo Stock Exchange (CSE) of Sri Lanka. Individual stock returns on 74 listed companies covering a 17-year period from 2000 to 2016 are used. A two step procedure is followed with the estimation of the short window time series regressions in the first step, while cross-sectional regressions are estimated in the second step. Test results show inconclusive evidence about the conditional four-moment CAPM. Risk of coskewness is significant though risk of covariance and co-kurtosis are not significant explaining the average return on individual stocks on the CSE during the period under study.

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Decomposing the bias in time-series estimates of CAPM betas

Cited by 2 publications

References 13 publications

Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India

Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India

Testing the Validity of Conditional Four Moment Capital Asset Pricing Model: Empirical Evidence from the Colombo Stock Exchange

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