An Examination of Alternative Factor Models in UK Stock Returns |
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Authors: | Fletcher Jonathan |
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Institution: | (1) Department of Accounting and Finance, University of Strathclyde, Curran Building, 100 Cathedral Street, Glasgow, G4 0LN, United Kingdom |
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Abstract: | This paper examines the mean-variance efficiency of a number offactor models in UK stock returns. The paper also explores, using theapproach of MacKinlay (1995), whether missing risk factors ornonrisk-based explanations best explain the pricing errors of thedifferent factor models. The evidence in the paper suggests that themean-variance efficiency of each factor model is rejected and missing riskfactors are unable to explain the pricing errors of any of the models.Some nonrisk-based explanations, which posit a wide spread in abnormalreturns, may be a more plausible source of explaining the pricing errorsof the factor models. |
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Keywords: | multifactor models CAPM |
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