Abstract:We tested an investment strategy based on the pricing error of the CAPM model. Starting with the Markowitz (1952) [1] methodology, we replaced the standard expected returns vector with the expected errors vector from the CAPM model, assuming that such errors are nonzero and persist over time. When evaluated over the entire examined period, all of the resulting portfolios outperformed the market portfolio. Except for some shorter periods, our hypothesis was fully confirmed. That is, the performance of our alpha… Show more
Set email alert for when this publication receives citations?
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.