A multifactor model of stock returns with endogenous regime switching

We estimate a state-dependent multifactor model with two endogenous states. Its pricing accuracy is slightly superior to that of the Fama and French (1993, 1996) model. We have evidence for dramatically increased factor loadings for distress factors in one state. These results have implications for cost-of-capital calculations, portfolio management, risk analysis and other applications.

MoreLess

Year of publication:	2004-01
Authors:	Coggi, Patrick ; Manescu, Bogdan
Institutions:	School of Economics and Political Science, Universität St. Gallen
Subject:	Empirical asset pricing \| endogenous regime switching \| state-dependent models \| nonstandard maximum-likelihood estimation

More details

Extent:	application/pdf
Series:	University of St. Gallen Department of Economics working paper series 2004.
Type of publication:	Book / Working Paper
Language:	English
Notes:	31 pages
Classification:	C52 - Model Evaluation and Testing ; G10 - General Financial Markets. General ; G11 - Portfolio Choice ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005453918