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Evaluating a nonlinear asset pricing model on international data

Asgharian, Hossein LU and Carlsson, Sonnie LU (2008) In International Review of Financial Analysis p.604-621
Abstract
The paper analyses the ability of a non-linear asset pricing model suggested by Dittmar [Dittmar, R.F., 2002. Non-linear pricing kernels, kurtosis preference, and the cross-section of equity returns. Journal of Finance 57, 369–403] to explain the returns on international value and growth portfolios. For comparison we use competing pricing models such as the ICAPM, the exchange rate risk augmented ICAPM and the international two-factor model proposed by Fama and French [Fama, E.F., French, K. R., 1998. Value versus growth: The international evidence. Journal of Finance 53, 1975–1999]. All models are evaluated both unconditionally and conditionally. The models are evaluated by applying the Hansen and Jagannathan distance measure, and we also... (More)
The paper analyses the ability of a non-linear asset pricing model suggested by Dittmar [Dittmar, R.F., 2002. Non-linear pricing kernels, kurtosis preference, and the cross-section of equity returns. Journal of Finance 57, 369–403] to explain the returns on international value and growth portfolios. For comparison we use competing pricing models such as the ICAPM, the exchange rate risk augmented ICAPM and the international two-factor model proposed by Fama and French [Fama, E.F., French, K. R., 1998. Value versus growth: The international evidence. Journal of Finance 53, 1975–1999]. All models are evaluated both unconditionally and conditionally. The models are evaluated by applying the Hansen and Jagannathan distance measure, and we also employ several alternative measures to ensure a robust comparison of the models. We find support for the model of Dittmar [Dittmar, R.F., 2002. Non-linear pricing kernels, kurtosis preference, and the cross-section of equity returns. Journal of Finance 57, 369–403]. Evaluated conditionally, this model successfully passes all the different diagnostic tests performed in the analysis. (Less)
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organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
International markets, Non-linear asset pricing, Hansen and Jagannathan distance, Value effect
in
International Review of Financial Analysis
pages
604 - 621
publisher
North-Holland
external identifiers
  • scopus:44349132131
ISSN
1057-5219
DOI
10.1016/j.irfa.2007.04.002
language
English
LU publication?
yes
id
909590f9-26c5-441a-b202-466342a9928b (old id 1384831)
date added to LUP
2016-04-01 11:52:21
date last changed
2022-01-26 19:31:35
@article{909590f9-26c5-441a-b202-466342a9928b,
  abstract     = {{The paper analyses the ability of a non-linear asset pricing model suggested by Dittmar [Dittmar, R.F., 2002. Non-linear pricing kernels, kurtosis preference, and the cross-section of equity returns. Journal of Finance 57, 369–403] to explain the returns on international value and growth portfolios. For comparison we use competing pricing models such as the ICAPM, the exchange rate risk augmented ICAPM and the international two-factor model proposed by Fama and French [Fama, E.F., French, K. R., 1998. Value versus growth: The international evidence. Journal of Finance 53, 1975–1999]. All models are evaluated both unconditionally and conditionally. The models are evaluated by applying the Hansen and Jagannathan distance measure, and we also employ several alternative measures to ensure a robust comparison of the models. We find support for the model of Dittmar [Dittmar, R.F., 2002. Non-linear pricing kernels, kurtosis preference, and the cross-section of equity returns. Journal of Finance 57, 369–403]. Evaluated conditionally, this model successfully passes all the different diagnostic tests performed in the analysis.}},
  author       = {{Asgharian, Hossein and Carlsson, Sonnie}},
  issn         = {{1057-5219}},
  keywords     = {{International markets; Non-linear asset pricing; Hansen and Jagannathan distance; Value effect}},
  language     = {{eng}},
  pages        = {{604--621}},
  publisher    = {{North-Holland}},
  series       = {{International Review of Financial Analysis}},
  title        = {{Evaluating a nonlinear asset pricing model on international data}},
  url          = {{http://dx.doi.org/10.1016/j.irfa.2007.04.002}},
  doi          = {{10.1016/j.irfa.2007.04.002}},
  year         = {{2008}},
}