Assessing asset pricing models using revealed preference

Jonathan B. Berk and Jules van Binsbergen

Journal of Financial Economics, 2016, vol. 119, issue 1, 1-23

Abstract: We propose a new method of testing asset pricing models that relies on quantities rather than just prices or returns. We use the capital flows into and out of mutual funds to infer which risk model investors use. We derive a simple test statistic that allows us to infer, from a set of candidate models, the risk model that is closest to the model that investors use in making their capital allocation decisions. Using our method, we assess the performance of the most commonly used asset pricing models in the literature.

Keywords: Asset Pricing Test; Factor Models; CAPM; Mutual Funds; Flows (search for similar items in EconPapers)
JEL-codes: G11 G20 G23 J31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (108)

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Related works:
Working Paper: Assessing Asset Pricing Models Using Revealed Preference (2015)
Working Paper: Assessing Asset Pricing Models Using Revealed Preference (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:1:p:1-23

DOI: 10.1016/j.jfineco.2015.08.010

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