A Mean-Variance Framework for Tests of Asset Pricing Models

Shmuel Kandel; Robert F. Stambaugh

doi:10.1093/rfs/2.2.125

A Mean-Variance Framework for Tests of Asset Pricing Models

Shmuel Kandel^1,2; Robert F. Stambaugh^3,4

¹ Tel Aviv University · ² University of Chicago · ³ California University of Pennsylvania · ⁴ University of Pennsylvania

Review of Financial Studies 1989

This article presents a mean-variance framework for likelihood-ratio tests of asset pricing models. A pricing model is tested by examining the position of one or more reference portfolios in sample mean-standard-deviation space. Included are tests of both single-beta and multiple-beta relations, with or without a riskless asset, using either a general or a specific alternative hypothesis. Tests with a factor that is not a portfolio return are also included. The mean-variance framework is illustrated by testing the zero-beta CAPM, a two-beta pricing model, and the consumption-beta model.

DOI: 10.1093/rfs/2.2.125
Volume: 2 (2)
Pages: 125-156
Language: en
Export: BibTeX
Sources: openalex crossref