 Testing conditional factor modelsAndrew Ang and Dennis Kristensen Journal of Financial Economics, 2012, vol. 106, issue 1, 132-156 Abstract: Using nonparametric techniques, we develop a methodology for estimating and testing conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The estimators and tests can be implemented for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios. Keywords: Nonparametric estimator; Time-varying beta; Conditional alpha; Book-to-market premium; Value and momentum (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:106:y:2012:i:1:p:132-156 DOI: 10.1016/j.jfineco.2012.04.008 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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