Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CAP
| Identifer | oai:union.ndltd.org:MIT/oai:dspace.mit.edu:1721.1/3544 |
| Date | 16 September 2003 |
| Creators | LEWELLEN, JONATHAN, NAGEL, STEFAN |
| Source Sets | M.I.T. Theses and Dissertation |
| Language | en_US |
| Detected Language | English |
| Type | Working Paper |
| Format | 318782 bytes, application/pdf |
| Relation | MIT Sloan School of Management Working Paper;4427-03 |
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