Asset Pricing Under the Presence of Transactions Cost:Evidence from the UK Stock Market

Andros Gregoriou () and Christos Ioannidis
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Christos Ioannidis: Brunel Business School, Economics and Finance Section, Brunel University, Uxbridge, Middlesex, UB8 3PH

Ekonomia, 2004, vol. 7, issue 2, 139-151

Abstract: In this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. This is undertaken by extending the VAR approach proposed by Campbell and Shiller (1988a) to incorporate the bid-ask spread. Overall the statistical tests are unable to reject the bid-ask spread as an independent explanatory variable in the consumption CAPM. This leads to the conclusion that transactions costs should be included in asset pricing models.

JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ekn:ekonom:v:7:y:2004:i:2:p:139-151

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