A Non-Parametric Test of the Conditional CAPM for the Mexican Economy

Jorge H. del Castillo-Spíndola
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Jorge H. del Castillo-Spíndola: Universidad Nacional Autónoma de México

Estudios Económicos, 2006, vol. 21, issue 2, 275-297

Abstract: Many models have been suggested to describe how investors manage risk and value risky cash flows. Among them, the most widely used is the Sharpe-Lintner-Black Capital Asset Pricing Model (CAPM). However many anomalies and evidence against this version have been presented. To assume that the CAPM holds in a conditional sense is to assume that the betas and the market risk premium vary along time. We present a test of the conditional version of the CAPM for the Mexican economy, that uses a non-parametric methodology suggested by Wang that avoids the problem of functional form misspecification of the betas of the assets.

Keywords: CAPM; conditional mean-variance efficiency; betas of the assets; market risk premium; non-parametric testing (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 G12 G13 G14 (search for similar items in EconPapers)
Date: 2006
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