Tests of the Relations among Marketwide Factors, Firm-Specific Variables, and Stock Returns Using a Conditional Asset Pricing Model

He, Jia, et al

Journal of Finance, 1996, vol. 51, issue 5, 1891-1908

Abstract: In this article, the authors generalize C. Harvey's (1989) empirical specification of conditional asset pricing models to allow for both time-varying covariances between stock returns and marketwide factors and time-varying reward-to-covariabilities. The model is then applied to examine the effects of firm size and book-to-market equity ratios. The authors find that the traditional asset pricing model with commonly used factors can only explain a small portion of the stock returns predicted by firm size and book-to-market equity ratios. The results indicate that allowing time-varying covariances and time-varying reward-to-covariabilities does little to salvage the traditional asset pricing models. Coauthors are Raymond Kan, Lilian Ng, and Chu Zhang. Copyright 1996 by American Finance Association.

Date: 1996
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Citations: View citations in EconPapers (21)

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