Comparing Asset Pricing Models: An Investment Perspective

Lubos Pastor and Robert Stambaugh

No 7284, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the portfolio choices of mean-variance-optimizing investors who use sample evidence to update prior beliefs centered on either risk-based or characteristic-based pricing models. With dogmatic beliefs in such models and an unconstrained ratio of position size to capital, optimal portfolios can differ across models to economically significant degrees. The differences are substantially reduced by modest uncertainty about the models' pricing abilities. When the ratio of position size to capital is subject to realistic constraints, the differences in portfolios across models become even less important, nonexistent in some cases.

JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 1999-08
New Economics Papers: this item is included in nep-fin
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Journal of Financial Economics, Vol. 56 (2000): 335-381.

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Related works:
Journal Article: Comparing asset pricing models: an investment perspective (2000)
Working Paper: Comparing Asset Pricing Models: An Investment Perspective (1999)
Working Paper: Comparing Asset Pricing Models: An Investment Perspective
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