Skip to content Skip to navigation
University of Warwick
  • Study
  • |
  • Research
  • |
  • Business
  • |
  • Alumni
  • |
  • News
  • |
  • About

University of Warwick
Publications service & WRAP

Highlight your research

  • WRAP
    • Home
    • Search WRAP
    • Browse by Warwick Author
    • Browse WRAP by Year
    • Browse WRAP by Subject
    • Browse WRAP by Department
    • Browse WRAP by Funder
    • Browse Theses by Department
  • Publications Service
    • Home
    • Search Publications Service
    • Browse by Warwick Author
    • Browse Publications service by Year
    • Browse Publications service by Subject
    • Browse Publications service by Department
    • Browse Publications service by Funder
  • Help & Advice
University of Warwick

The Library

  • Login
  • Admin

Misspecification-robust inference in linear asset pricing models with irrelevant risk factors

Tools
- Tools
+ Tools

Gospodinov, Nikolay, Kan, Raymond and Robotti, Cesare (2014) Misspecification-robust inference in linear asset pricing models with irrelevant risk factors. Review of Financial Studies, 27 (7). pp. 2139-2170. doi:10.1093/rfs/hht135

[img] PDF
WRAP-misspecification-robust-inference-linear-asset-pricing-models-Robotti-2014.pdf - Accepted Version
Embargoed item. Restricted access to Repository staff only - Requires a PDF viewer.

Download (645Kb)
Official URL: https://doi.org/10.1093/rfs/hht135

Request Changes to record.

Abstract

This paper shows that in misspecified models with risk factors that are uncorrelated with the test asset returns, the conventional inference methods tend to erroneously conclude, with high probability, that these factors are priced. Our proposed model selection procedure, which is robust to identification failure and potential model misspecification, restores the standard inference and proves to be effective in eliminating factors that do not improve the model's pricing ability. Applying our methodology to several popular asset-pricing models suggests that only the market and book-to-market factors appear to be priced, while the statistical evidence on the pricing ability of many macroeconomic factors is rather weak.

Item Type: Journal Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Warwick Business School > Finance Group
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Capital assets pricing model, Inference, Probabilities, Linear models (Statistics)
Journal or Publication Title: Review of Financial Studies
Publisher: Oxford University Press
ISSN: 0893-9454
Official Date: 1 July 2014
Dates:
DateEvent
1 July 2014Published
28 January 2014Available
15 November 2013Accepted
Volume: 27
Number: 7
Page Range: pp. 2139-2170
DOI: 10.1093/rfs/hht135
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
UNSPECIFIEDFonds de recherche du Québec-Société et culturehttp://dx.doi.org/10.13039/100008240
UNSPECIFIEDInstitut de finance mathématique de MontréalUNSPECIFIED
UNSPECIFIEDSocial Sciences and Humanities Research Council of Canadahttp://dx.doi.org/10.13039/501100000155
UNSPECIFIEDNational Bank Financial Grouphttp://viaf.org/viaf/160537889

Request changes or add full text files to a record

Repository staff actions (login required)

View Item View Item
twitter

Email us: wrap@warwick.ac.uk
Contact Details
About Us