The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset-pricing models. There have been concerns that, compared to the classical beta method, the generality of the SDF method comes at the cost of efficiency in parameter estimation and...

Most empirical studies of the static capital asset pricing model (CAPM) assume that betas remain constant over time and that the return on the value-weighted portfolio of all stocks is a proxy for the return on aggregate wealth. The general consensus is that the static CAPM is unable to explain...

In empirical studies of the CAPM, it is commonly assumed that, (a) the return to the value-weighted portfolio of all stocks is a reasonable proxy for the return on the market portfolio of all assets in the economy, and (b) betas of assets remain constant over time. Under these assumptions, Fama...

Without the assumption of conditional homoskedasticity, a general asymptotic distribution theory for the two-stage cross-sectional regression method shows that the standard errors produced by the Fama-MacBeth procedure do not necessarily overstate the precision of the risk premium estimates....

In empirical studies of the CAPM, it is commonly assumed that, (a) the return to the value-weighted portfolio of all stocks is a reasonable proxy for the return on the market portfolio of all assets in the economy, and (b) betas of assets remain constant over time. Under these assumptions, Fama...