Due to a lack of supporting evidence, market beta in the widely-acclaimed Capital Asset Pricing Model (CAPM) is considered dead nowadays. In this paper we propose a novel approach for estimating market beta using the traditional market model. Upon deriving a covariance adjustment term, we...

This paper provides cross-sectional tests of the Capital Asset Pricing Model (CAPM). To mitigate problems with noise in realized stock return series, we use a smoothed data series of average daily returns per month. Tests using U.S. stock returns for equal-weighted portfolios indicate that beta...

We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing...

This paper employs the ZCAPM asset pricing model of Liu, Kolari, and Huang (2018) to show that momentum returns are highly related to market risk arising from return dispersion (RD). Cross-sectional tests show that momentum risk loadings and RD risk loadings are similarly priced in momentum...

A recent book by Kolari, Liu, and Huang (KLH) (2021) developed a new theoretical capital asset pricing model dubbed the ZCAPM, which outperformed well-known multifactor models in cross-sectional tests using U.S. stocks. This paper extends their analyses by employing a longer sample period from...

A growing list of proposed factors is causing factor and model selection problems in asset pricing research and practice. This paper mitigates these problems by combining the CRSP market index with multiple factors to create a single multifactor market index. Empirical tests of multifactor...

This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black's well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM)...