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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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author
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
2009-04-20 12:27:15
date last changed
2017-01-01 04:37:21
@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},
  keyword      = {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},
  year         = {2008},
}