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Can An "Estimation Factor" Help Explain Cross-Sectional Returns?

Lundtofte, Frederik LU (2009) In Journal of Business Finance & Accounting 36(5-6). p.705-724
Abstract
We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model by using GMM and compare it to the CAPM. The results suggest that adding an "estimation factor" to the CAPM helps in explaining cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
equilibrium, learning, incomplete information, asset pricing models
in
Journal of Business Finance & Accounting
volume
36
issue
5-6
pages
705 - 724
publisher
Wiley-Blackwell
external identifiers
  • wos:000268100300007
  • scopus:68349146702
ISSN
0306-686X
DOI
10.1111/j.1468-5957.2009.02131.x
language
English
LU publication?
yes
id
0f1bf980-37ef-4fea-90e2-9adb2877b8c8 (old id 1388288)
date added to LUP
2009-04-20 12:27:29
date last changed
2017-01-01 05:02:06
@article{0f1bf980-37ef-4fea-90e2-9adb2877b8c8,
  abstract     = {We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model by using GMM and compare it to the CAPM. The results suggest that adding an "estimation factor" to the CAPM helps in explaining cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium.},
  author       = {Lundtofte, Frederik},
  issn         = {0306-686X},
  keyword      = {equilibrium,learning,incomplete information,asset pricing models},
  language     = {eng},
  number       = {5-6},
  pages        = {705--724},
  publisher    = {Wiley-Blackwell},
  series       = {Journal of Business Finance & Accounting},
  title        = {Can An "Estimation Factor" Help Explain Cross-Sectional Returns?},
  url          = {http://dx.doi.org/10.1111/j.1468-5957.2009.02131.x},
  volume       = {36},
  year         = {2009},
}