Comment: A Test of Stone's Two-Index Model of Returns

Don M. Chance

Journal of Financial and Quantitative Analysis, 1979, vol. 14, issue 3, 641-644

Abstract: In a recent article Lloyd and Shick [3] examined a two-index model of bank stock returns with interest rates as the extra-market source of covariance. Based on their findings, the authors were optimistic that the inclusion of an interest rate index would prove to be worthwhile in market model regressions. The purpose of this comment is to question their conclusions by pointing out some specific deficiencies concerning their data, the statistical tests, and their interpretation of the results.

Date: 1979
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