A Test of the Conditional CAPM with Simultaneous Estimation of the First and Second Conditional Moments

David M Ellis

The Financial Review, 1996, vol. 31, issue 3, 475-98

Abstract: Recent studies of the conditional Capital Asset Pricing Model (CAPM) are extended by modeling the first and second conditional moments separately, but estimating them jointly, allowing the isolation of time-varying influences in the different moments. Results support evidence that both conditional moments and conditional risk parameters are time varying and help shed light on previous rejections of the conditional CAPM. The GMM test of the over-identifying restrictions fails to reject the null that the CAPM holds through time when a nonlinear specification is used and only weakly rejects the null with a linear specification. Copyright 1996 by MIT Press.

Date: 1996
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