Can An "Estimation Factor" Help Explain Cross-Sectional Returns?
(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.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/1388288
- author
- Lundtofte, Frederik LU
- organization
- publishing date
- 2009
- 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
- 2016-04-01 12:18:55
- date last changed
- 2022-01-27 01:56:11
@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}}, keywords = {{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}}, doi = {{10.1111/j.1468-5957.2009.02131.x}}, volume = {{36}}, year = {{2009}}, }