NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Testing Conditional Factor Models

Andrew Ang, Dennis Kristensen

NBER Working Paper No. 17561
Issued in November 2011
NBER Program(s):Asset Pricing

Using nonparametric techniques, we develop a methodology for estimating conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The tests can be performed for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios.

download in pdf format
   (377 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17561

Published: Ang, Andrew & Kristensen, Dennis, 2012. "Testing conditional factor models," Journal of Financial Economics, Elsevier, vol. 106(1), pages 132-156. citation courtesy of

Users who downloaded this paper also downloaded* these:
Roussanov w16073 Composition of Wealth, Conditioning Information, and the Cross-Section of Stock Returns
Nagel and Singleton w16457 Estimation and Evaluation of Conditional Asset Pricing Models
Cho and Engle w7330 Time-Varying Betas and Asymmetric Effect of News: Empirical Analysis of Blue Chip Stocks
Ang and Timmermann w17182 Regime Changes and Financial Markets
Campbell and Vuolteenaho w9509 Bad Beta, Good Beta
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us