A multifactor model of stock returns with endogenous regime switching

Patrick Coggi () and Bogdan Manescu ()

University of St. Gallen Department of Economics working paper series 2004 from Department of Economics, University of St. Gallen

Abstract: We estimate a state-dependent multifactor model with two endogenous states. Its pricing accuracy is slightly superior to that of the Fama and French (1993, 1996) model. We have evidence for dramatically increased factor loadings for distress factors in one state. These results have implications for cost-of-capital calculations, portfolio management, risk analysis and other applications.

Keywords: Empirical asset pricing; endogenous regime switching; state-dependent models; nonstandard maximum-likelihood estimation (search for similar items in EconPapers)
JEL-codes: C52 G10 G11 G12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-01
New Economics Papers: this item is included in nep-ets, nep-fin and nep-fmk
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Citations: View citations in EconPapers (4)

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