Practitioners needing estimates of a firm's equity cost of capital have long relied on the Capital Asset Pricing Model (CAPM). Recent evidence casts renewed doubt on the validity of the CAPM and beta. However, there is not much evidence to gauge the importance of the rejections of the CAPM in a...

We provide a brief review of the techniques that are based on the Generalized Method of Moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We...

This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple...

We develop asset pricing models' implications for portfolio efficiency with conditioning information in the form of lagged instruments. A model identifies a portfolio that should be minimum-variance efficient with respect to the conditioning information. Our framework refines tests of portfolio...

Previous studies identify predetermined variables that predict stock and bond returns through time. This paper shows that loadings on the same variables provide significant cross-sectional explanatory power for stock portfolio returns. The loadings are significant given the three factors...

Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of <link rid="b49">Yule (1926)</link> and <link rid="b21">Granger and Newbold (1974)</link>. Data mining for predictor variables interacts with spurious regression bias. The...