Identifying proxies for risk-free assets: Evidence from the zero-beta capital asset pricing model

Zhen He, O’Connor, Fergal and Jacco Thijssen

Research in International Business and Finance, 2022, vol. 63, issue C

Abstract: This research offers the first analysis of whether gold, T-bills, Overnight Index Swaps (OIS) or Interbank Offered Rates (IBOR) can be used as proxy for the risk-free asset in the UK, US, China, Japan and India. Using Blacks (1972) Zero-Beta CAPM we apply Wald and Likelihood Ratio Tests to assess whether gold, T-bills, OIS or IBOR qualify as Zero-Beta or risk free assets against each company in FTSE 350, S&P 500, SSE 180, NIKKEI 225 and SENSEX. We find that gold is a proxy for the risk-free asset in the UK and China; T-bills are a proxy for risk-free assets in Japan and IBOR is a proxy for the risk-free rate in China. None qualify as risk free for the US market. According to our results, there is no universal risk-free asset for the UK, US, China, Japan and India.

Keywords: Risk-free asset; Zero-beta asset; Zero-beta CAPM; Gold; T-bills; OIS (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:63:y:2022:i:c:s0275531922001611

DOI: 10.1016/j.ribaf.2022.101775

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