@techreport{NBERw12360,
 title = "A Skeptical Appraisal of Asset-Pricing Tests",
 author = "Jonathan Lewellen and Stefan Nagel and Jay Shanken",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "12360",
 year = "2006",
 month = "July",
 URL = "http://www.nber.org/papers/w12360",
 abstract = {It has become standard practice in the cross-sectional asset-pricing literature to evaluate models based on how well they explain average returns on size- and B/M-sorted portfolios, something many models seem to do remarkably well. In this paper, we review and critique the empirical methods used in the literature. We argue that asset-pricing tests are often highly misleading, in the sense that apparently strong explanatory power (high cross-sectional R2s and small pricing errors) in fact provides quite weak support for a model. We offer a number of suggestions for improving empirical tests and evidence that several proposed models don%u2019t work as well as originally advertised.},
}