TY - JOUR
T1 - Return predictability of higher-moment CAPM market models
AU - Hung, Chi-Hsiou
N1 - Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2008/9
Y1 - 2008/9
N2 - This paper examines the relative performance of the higher-moment CAPM market models and the CAPM in explaining realised returns and predicting one-period-ahead returns on individual stocks and (both equally- and value-weighted) portfolios of momentum, size and country sorts. The three-moment CAPM, the quadratic-marke model, provides the best ex post estimates in respect of the time-variation in returns on both the return winner and the smallest size portfolios. Further analysis using an orthogonal factor model for tackling multicollinearity confirms the findings. Parameter uncertainty, however, impinges on forecast accuracy and hence hampers the predictive ability of the higher-moment models.
AB - This paper examines the relative performance of the higher-moment CAPM market models and the CAPM in explaining realised returns and predicting one-period-ahead returns on individual stocks and (both equally- and value-weighted) portfolios of momentum, size and country sorts. The three-moment CAPM, the quadratic-marke model, provides the best ex post estimates in respect of the time-variation in returns on both the return winner and the smallest size portfolios. Further analysis using an orthogonal factor model for tackling multicollinearity confirms the findings. Parameter uncertainty, however, impinges on forecast accuracy and hence hampers the predictive ability of the higher-moment models.
UR - http://www.scopus.com/inward/record.url?scp=54749143214&partnerID=8YFLogxK
U2 - 10.1111/j.1468-5957.2008.02102.x
DO - 10.1111/j.1468-5957.2008.02102.x
M3 - Article
AN - SCOPUS:54749143214
SN - 0306-686X
VL - 35
SP - 998
EP - 1022
JO - Journal of Business Finance and Accounting
JF - Journal of Business Finance and Accounting
IS - 7-8
ER -