To attenuate an inherent errors-in-variables bias, portfolios are widely employed for risk premium estimation; but portfolios might diversify away and thus mask relevant risk- or return-related features of individual assets. We propose a resolution that allows the use of individual assets while...

To attenuate an inherent errors-in-variables bias, portfolios are widely employed to test asset pricing models; but portfolios might mask relevant risk- or return-related features of individual assets. We propose an instrumental variables approach that allows the use of individual stocks as test...