 fama and macbeth revisited: A CritiqueJuan Salazar and Annick Lambert MPRA Paper from University Library of Munich, Germany Abstract: The main conclusion of the FM study relies on the fact that the average of the slopes of 402 regressions of the monthly returns on 20 portfolios on theirs beta coefficients is positive. Considering this set of 402 slopes as a random sample drawn from the same normally distributed population, FM performed a t-test on the mean and conclude that the true mean significantly differs from zero. Then they took this result as a proof in favour of the theory that there is in the real world a perfect linear relationship between the expected return and the true beta of securities and portfolios or, in other terms, in favour of the theory that the market portfolio is efficient. In this article, we present several tests and arguments that put some shadow on these conclusions. In fact, several tests lead us to the conclusion that the 402 random observations above mentioned are not drawn from a normal (or symmetric stable) distribution, neither are they independent or identically distributed. Indeed, the most disturbing fact is that those observations are likely not independent. Keywords: CAPM; CAPT; Portfolio theory; Empirical tests; Hypothesis testing; Regression analysis; Spectral analysis; January anomaly (search for similar items in EconPapers) Published in Aestimatio. The IEB International Journal of Finance 1 (2010): pp. 1-24 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35910 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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