A Cross-Sectional Test of a Production-Based Asset Pricing Model
John Cochrane
No 4025, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper tests a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. The tests examine the model's ability to explain the variation in expected returns across assets and over time. The model is not rejected. It performs about as well as the CAPM and the Chen, Roll and Ross factor model, and it performs substantially better than a simple consumption-based model. In comparison tests, the investment return factors drive out all the other models. The paper also provides an easy technique for estimating and testing dynamic, conditional asset pricing models. All one has to do is include factors and returns scaled by instruments in an unconditional estimate. This procedure imposes none of the usual restrictions on conditional moments, and does not require prewhitened or orthogonalized factors.
Date: 1992-03
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)
Published as Journal of Political Economy, vol. 104, no. 3, pp. 572-621, 1996.
Downloads: (external link)
http://www.nber.org/papers/w4025.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4025
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4025
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().