Journal of Finance Vol. 48 No. 1 1993
General Tests of Latent Variable Models and Mean-Variance Spanning.
Abstract
The methods of Michael R. Gibbons and Wayne Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean-variance spanning generalizes G. Huberman and S. Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size-based common stock portfolios proxy for the risk factors, the authors reject the hypothesis that four of them describe the conditional expected returns of the other assets.
- Volume
- 48
- Issue
- 1
- Pages
- 131-56
- Sources
- bibtex:phds-export.bib