CAPM CONDITIONAL MODEL: GENERAL OVERVIEW

Elmo Tambosi Filho () and Fabio Gallo Garcia ()
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Elmo Tambosi Filho: Universidade Metodista
Fabio Gallo Garcia: Fundação Getulio Vargas; Pontifícia Universidade Católica de São Paulo

Revista de Economia Mackenzie (REM), 2007, vol. 5, issue 5, 129-140

Abstract: Despite all the criticism, the improvement of the static CAPM, which has generated new dynamic models, provided investors with stronger guarantee through financial transactions. The CAPM and its static version were and are still very important in the financial scene. Nowadays, more sophisticated ad-aptations of the CAPM are found, which allow us to explain some matters in finance that had remained unqualified for a couple of time. Considering such discussion about the CAPM validity, this study intends creates a basis for reflection upon the conditional model comparing it with the static one. In order to verify such facts, tests of conditional models are examined (with beta varying throughout the exercise), something uncommonly studied in the literature. Such tests are suitable to incorporate variances and covariances that change throughout the time. Methodological wise, the study tested the conditional CAPM model by Jagannathan and Wang (1996).

Keywords: Conditional CAPM; Validity; Treasury Bill; Static CAPM; Con-ditional variance. (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:aft:journl:v:5:5:2007:jan:dec:p:129-140

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