Money and the C-CAPM

AbstractWe consider asset pricing in a monetary economy where liquid assets are held to lower transaction costs. The ensuing model extends the capital asset pricing model (CAPM) and the consumption CAPM by deriving real money growth as an additional factor determining returns. Empirically, the two model versions compare favorably to other theoretical asset pricing models along several dimensions, supporting the traditional intertemporal asset pricing perspective. A value premium arises because value firms are sensitive to liquidity shocks but growth firms are not. Although no alternative factor drives out the money growth factor, the conditioning CAY factors of Lettau and Ludvigson (2001b) add explanatory power.

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Comparing Entropy and Beta as Measures of Risk in Asset Pricing

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis ◽

10.11118/actaun201765061889 ◽

2017 ◽

Vol 65 (6) ◽

pp. 1889-1894 ◽

Cited By ~ 2

Author(s):

Galina Deeva

Keyword(s):

Asset Pricing ◽

Shannon Entropy ◽

Explanatory Power ◽

Kernel Density ◽

Parametric Estimation ◽

Capital Asset Pricing ◽

Risk Premiums ◽

Risk Return ◽

Asset Pricing Models ◽

Non Parametric Estimation

The paper establishes entropy as a measure of risk in asset pricing models by comparing its explanatory power with that of classic capital asset pricing model’s beta to describe the diversity in expected risk premiums. Three different non‑parametric estimation procedures are considered to evaluate financial entropy, namely kernel density estimated Shannon entropy, kernel density estimated Rényi entropy and maximum likelihood Miller‑Madow estimated Shannon entropy. The comparison is provided based on the European stock market data, for which the basic risk‑return trade‑off is generally negative. Kernel density estimated Shannon entropy provides the most efficient results not dependent on the choice of the market benchmark and without imposing any prior model restrictions.

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International Asset Pricing Models: The Case of ASEAN Stock Markets

International Journal of Banking and Finance - Vol. 15, Number 2, 2020 ◽

10.32890/ijbf2009.6.1.8385 ◽

2009 ◽

Author(s):

Chee-wooi Hooy ◽

Kim-leng Goh

Keyword(s):

Asset Pricing ◽

Stock Markets ◽

Explanatory Power ◽

Risk Exposure ◽

Capital Asset Pricing ◽

International Capital ◽

Pricing Models ◽

Asset Pricing Models ◽

Regional Factor

This paper is about the role of economic grouping as it affects international capital asset pricing models, ICAPM. The conventional ICAPM is extended to include the economic grouping, regional and world factors. Inclusion of the economic grouping factor increases the explanatory power of the asset pricing models. Data on ASEAN (Indonesia, Malaysia, Philippines, Singapore and Thailand) stock markets are used in tests of the proposed models. The economic grouping factor turned out to be most important while the regional factor is least important for asset pricing in these stock markets. While four of the markets have higher systematic risk exposure to the economic group, the Singapore market, the largest market, exhibits higher exposure to world risk. The segmentation of emerging markets offers a possible explanation of these results.

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Freedom Indices and Capital Asset Pricing Model: Some Malaysian Evidence

International Journal of Management, Finance and Accounting ◽

10.33093/ijomfa.2020.1.1.1 ◽

2020 ◽

Vol 1 (1) ◽

pp. 1-21

Author(s):

Ying Tay Lee ◽

Devinaga Rasiah ◽

Ming Ming Lai

Keyword(s):

Human Rights ◽

Asset Pricing ◽

Stock Returns ◽

Firm Size ◽

Explanatory Power ◽

Least Square ◽

Press Freedom ◽

Capital Asset Pricing ◽

Capital Asset ◽

Cross Sectional

Human rights and fundamental freedoms such as economic, political, and press freedoms vary widely from country to country. It creates opportunity and risk in investment decisions. Thus, this study is carried out to examine if the explanatory power of the model for capital asset pricing could be improved when these human rights movement indices are included in the model. The sample for this study comprises of 495 stocks listed in Bursa Malaysia, covering the sampling period from 2003 to 2013. The model applied in this study employed the pooled ordinary least square regression estimation. In addition, the robustness of the model is tested by using firm size as a controlled variable. The findings show that market beta as well as the economic and press freedom indices could explain the cross-sectional stock returns of the Malaysian stock market. By controlling the firm size, it adds marginally to the explanation of the extended CAP model which incorporated economic, political, and press freedom indices.

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PERFORMANCE ASSESSMENT INDEXES AND CAPITAL ASSET PRICING MODELS

Journal of Valuation ◽

10.1108/eb008010 ◽

1987 ◽

Vol 5 (3) ◽

pp. 230-249 ◽

Cited By ~ 4

Author(s):

STUART LOCKE

Keyword(s):

Asset Pricing ◽

Performance Assessment ◽

Capital Asset Pricing ◽

Capital Asset ◽

Pricing Models ◽

Asset Pricing Models

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Performance measurement models and their influence on net fundraising of investment funds

Revista Contabilidade & Finanças ◽

10.1590/1808-057x201805330 ◽

2018 ◽

Vol 29 (78) ◽

pp. 435-451

Author(s):

Anderson Rocha de J. Fernandes ◽

Simone Evangelista Fonseca ◽

Robert Aldo Iquiapaza

Keyword(s):

Risk Factors ◽

Fixed Effects ◽

Time Windows ◽

Explanatory Power ◽

Fund Performance ◽

Capital Asset Pricing ◽

Investment Funds ◽

Measurement Models ◽

Asset Pricing Models ◽

Two Phases

ABSTRACT This article aims to analyze the relation between third- and fourth-order conditions and risk factors and their adequacy to return, performance, and net fundraising. The factors used to determine fund performance and, consequently, their relation with fundraising are: market return, size, book-to-market, profitability, investment, co-skewness, and co-kurtosis. The funds constituting the sample are those classified as Free Stocks (within the period from April 2001 to April 2015). Methodologically, this study has two phases. The first one refers to estimating the parameters that represent fund sensitivity to the factors and the comparison of the capital asset pricing models (CAPM), Fama-French-Carhart 4-factor (FFC), Fama-French 5-factor (FF5), Fama-French 5-factor with momentum (FF5M), added or not with co-moments, by means of the fixed-effects procedure. The second one deals with verifying the relation between performance and net fundraising. The models were reestimated through moving time windows, so that the alpha calculated on each of them represented fund performance within the immediately subsequent period. We also estimated the relation fundraising-performance through cross-section regressions, with rates and age as control variables. The results showed that the co-skewness and co-kurtosis coefficients are not that relevant for determining performance and net fundraising of investment funds. Among the risk factors, market, size, and momentum are the significant parameters for fund returns. The FFC and FF5M models are those with greater explanatory power regarding return specification. There is also evidence of convexity in the relation between performance and fundraising.

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