Estimating and testing beta pricing models on industries

Yacine Hammami () and Anna Lindahl

Journal of Economics and Business, 2013, vol. 69, issue C, 45-63

Abstract: This paper uses the betas of book-to-market portfolios as proxies for systematic risks of industries instead of the individual betas computed from individual time-series regressions. Our empirical specification improves both the precision of the beta estimates and the cost of equity estimates. Estimating and testing beta pricing models via the proposed method highlights that consumption growth, liquidity risk, market excess returns, and the value factor explain the cross-sectional differences in expected industry returns, while there are no significant risk factors using the traditional approach. The fact that consumption risk is priced with monthly data is an interesting result, as the financial literature has struggled to prove that the consumption capital asset pricing model explains monthly returns.

Keywords: Asset pricing models; Systematic risk; Cost of equity; Consumption risk; Two-pass cross-sectional regressions (search for similar items in EconPapers)
JEL-codes: C10 C13 G10 G12 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014861951300043X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:69:y:2013:i:c:p:45-63

DOI: 10.1016/j.jeconbus.2013.05.003

Access Statistics for this article

Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter

More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().