首页 | 本学科首页   官方微博 | 高级检索  
     检索      


The non-relevance of the elusive holy grail of asset pricing tests: The “true” market portfolio does not alter CAPM validity conclusions
Authors:Cheekiat Low  Subhankar Nayak
Institution:1. National University of Singapore, Singapore;2. Financial Services Research Centre, School of Business and Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, ON N2L 3C5, Canada
Abstract:Empirical evaluations of CAPM usually attach a caveat that rejection is conditional on the choice of market proxy. We explore the criticality of the proxy choice disclaimer. Using different proxies and comprehensive simulations of the unobserved “true” market in Fama–MacBeth tests of CAPM, we find that the significance (t-statistics) corresponding to betas remain consistently unaltered, even if the proxy is a small fraction of or has a low correlation with the true market. The constancy of t-statistics persists in a simulated true-CAPM world as well: if CAPM is indeed valid, the choice of proxy is unlikely to reject it erroneously. Identity of the elusive true market portfolio and the choice of representative proxy cannot overturn conclusions on validity of CAPM based on Fama–MacBeth tests. Roll’s Critique, incontrovertible in theory, may be quite forgiving in practice  CAPM cannot be resurrected by a “closer” approximation of the elusive true market portfolio when it has commonly been rejected.
Keywords:
本文献已被 ScienceDirect 等数据库收录!
设为首页 | 免责声明 | 关于勤云 | 加入收藏

Copyright©北京勤云科技发展有限公司  京ICP备09084417号