Journal of Finance Vol. 45 No. 4 1990
Heteroskedasticity in Stock Returns.
Abstract
The authors use predictions of aggregate stock return variances from daily data to estimate time-varying monthly variances for size-ranked portfolios. The authors propose and estimate a single factor model of heteroskedasticity for portfolio returns. This model implies time-varying betas. Implications of heteroskedasticity and time-varying betas for tests of the capital asset pricing model are then documented. Accounting for heteroskedasticity increases the evidence that risk-adjusted returns are related to firm size. The authors also estimate a constant correlation model. Portfolio volatilities predicted by this model are similar to those predicated by more complex multivariate generalized autoregressive conditional heteroskedasticity procedures.
- Volume
- 45
- Issue
- 4
- Pages
- 1129-55
- Sources
- bibtex:phds-export.bib