TY  - JOUR
AU  - Lewellen,Jonathan
AU  - Nagel,Stefan
TI  - The Conditional CAPM does not Explain Asset-Pricing Anamolies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9974
PY  - 2003
Y2  - September 2003
UR  - http://www.nber.org/papers/w9974
L1  - http://www.nber.org/papers/w9974.pdf
N1  - Author contact info:
Jonathan Lewellen
Tuck School of Business at Dartmouth
305 Tuck Hall
Hanover, NH 03755
Tel: 603/646-8650
E-Mail: jon.lewellen@dartmouth.edu

Stefan Nagel
Stanford University
Graduate School of Business
655 Knight Way
Stanford, CA  94305
Tel: 650/724-9762
Fax: 650/725-7979
E-Mail: nagel_stefan@gsb.stanford.edu
AB  - Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CAPM.
ER  -