Review of Economic Studies Vol. 58 No. 3 1991
Risk, Time-Varying Second Moments and Market Efficiency
Abstract
This paper addresses two topics. First, it nests the consumption and static capital asset pricing model in a unified framework. Second, it tests for market efficiency. The first test is based on the idea that different models price risk on the basis of the covariance with different benchmark portfolios. The test of market efficiency is based on the idea that excess returns should be predictable only if risk and, therefore, second moments are predictable. The empirical results show that the static capital asset pricing model performs better than the consumption capital asset pricing model and that the former model accounts for the effects of dividend yields on expected returns.
- DOI
- 10.2307/2298007
- Volume
- 58
- Issue
- 3
- Pages
- 479
- Sources
- crossref bibtex:phds-export.bib openalex