In this paper, we test a version of the conditional CAPM with respect to a local market portfolio, proxied by the Brazilian stock index during the period 1976-1992. We also test a conditional APT mo deI by using the difference between the 3~day rate (Cdb) and the overnight rate as a second factor in addition to the market portfolio in order to capture the large inflation risk present during thi...

This study explores the conditional version of capital asset pricing model on sentiment to provide a behavioural intuition behind value premium and market mispricing. We find betas (β) risk vary over time across different indices portfolios. More importantly, state β derived from this sentiment-scaled provides explanation set anomalies driven by Different static β–return relation that gives fla...

Futures on fresh farmed salmon traded at the Fish Pool market in Norway are analyzed context of Capital Asset Pricing Model (CAPM) and a corresponding three-factor model where contracts separated based their maturities. Looking into 1 month; 6 months 12 contracts, we find that all alphas most betas statistically insignificant. We conclude CAPM equilibrium condition holds Salmon futures prices m...

The aim of this study is to examine the equity premium puzzle in Iran for the quarterly period of 1993-2016. In this regard, the hybrid bivariate Garch model and also fuzzy dummy variables with consumption capital asset pricing model (C-CAPM) have been used. The results of study show that using C-CAPM within fuzzy dummy variables (CCAPM-F), the relative risk aversion coefficient of investor is ...

The observed patterns of equity portfolio allocation around the world are at odds with predictions from a capital asset pricing model (CAPM). What has come to be called the “home-bias” phenomenon is that investors tend to hold a disproportionately large share of their equity portfolio in home country stocks as compared with predictions of the CAPM. This paper provides an explanation of the home...

In Brennan and Lo (2010), a mean-variance efficient frontier is defined as “impossible” if every portfolio on that frontier has negative weights, which is incompatible with the Capital Asset Pricing Model (CAPM) requirement that the market portfolio is mean-variance efficient. We prove that as the number of assets n grows, the probability that a randomly chosen frontier is impossible tends to o...

This paper deals with the CAPM-derived capital budgeting criterion, and in particular with Rubinstein’s (1973) criterion, according to which a project is profitable if the project rate of return is greater than the risk-adjusted cost of capital, where the latter depends on the project’s disequilibrium systematic risk. It is shown that the disequilibrium net present value implied by this criteri...

This paper presents a closed-form solution to the portfolio optimization problem where an agent wishes to maximize expected terminal wealth, trading continuously between a risk-free bond and a risky stock following Stressed-Beta dynamics specified in Fouque and Tashman (2010). The agent has a finite horizon and a utility of the Constant Relative Risk Aversion type. The model for stock dynamics ...