This work utilizes zero-beta CAPM to derive an alternative form dubbed the ZCAPM. The ZCAPM posits that asset prices are a function of market risk composed of two components: average market returns and cross-sectional market volatility. Market risk associated with average market returns in the CAPM market model is known as beta risk. We refer to market risk related to cross-sectional market volatility as zeta risk. Using U.S. stock returns from January 1965 to December 2010, out-of-sample cross-sectional asset pricing tests show that the ZCAPM better predicts stock returns than popular three- and four-factor models. These and other empirical tests lead us to conclude that the ZCAPM holds promise as a robust asset pricing model.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/149521 |
| Date | 03 October 2013 |
| Creators | Liu, Wei |
| Contributors | Kolari, James W, Kim, Hwagyun, Fields, Paige, Li, Qi, Huang, Jianhua Z |
| Source Sets | Texas A and M University |
| Language | English |
| Detected Language | English |
| Type | Thesis, text |
| Format | application/pdf |
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