TY  - JOUR
AU  - Ang,Andrew
AU  - Chen,Joseph
TI  - CAPM Over the Long Run: 1926-2001
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11903
PY  - 2005
Y2  - December 2005
UR  - http://www.nber.org/papers/w11903
L1  - http://www.nber.org/papers/w11903.pdf
N1  - Author contact info:
Andrew Ang
Columbia Business School
3022 Broadway 413 Uris
New York, NY 10027
Tel: 212/854-9154
Fax: 212/662-8474
E-Mail: aa610@columbia.edu

Joseph Chen
Graduate School of Management
University of California, Davis
One Shields Avenue
3216 Gallagher Hall
Davis, CA 95616-8609
Tel: (530) 752-7155
Fax: (530) 752-2924
E-Mail: chenjs@ucdavis.edu
AB  - A conditional one-factor model can account for the spread in the average returns of portfolios sorted by book-to-market ratios over the long run from 1926-2001. In contrast, earlier studies document strong evidence of a book-to-market effect using OLS regressions in the post-1963 sample. However, the betas of portfolios sorted by book-to-market ratios vary over time and in the presence of time-varying factor loadings, OLS inference produces inconsistent estimates of conditional alphas and betas. We show that under a conditional CAPM with time-varying betas, predictable market risk premia, and stochastic systematic volatility, there is little evidence that the conditional alpha for a book-to-market trading strategy is statistically different from zero.
ER  -