Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression

Wayne Ferson (), Sergei Sarkissian and Timothy Simin ()

No 12658, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become baised. Previous studies overstate the significance of time-varying alphas.

JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-cfn and nep-ecm
Note: AP
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Published as Ferson, Wayne E. & Sarkissian, Sergei & Simin, Timothy, 2008. "Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(02), pages 331-353, June.

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Journal Article: Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression (2008)
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