Journal of Finance Vol. 46 No. 4 1991
Testing the CAPM with Time-Varying Risks and Returns
Abstract
This paper draws on Engle's autoregressive conditionally heteroskedastic modeling strategy to formulate a conditional CAPM with time-varying risk and expected returns. The model is estimated by generalized method of moments. A CAPM that allows mean excess returns to shift in January survives generalized method of moments specification tests for a number of omitted variables. However, a residual dividend yield component is found to remain in the excess returns of smaller firms. We find significant monthly and quarterly components in the risk premia and beta estimates.
- DOI
- 10.2307/2328868
- Volume
- 46
- Issue
- 4
- Pages
- 1485
- Sources
- openalex crossref