Mispricing in Linear Asset Pricing Models
In the framework of conditional linear asset pricing models with time-varying risk premiums (and time-varying betas), we derive a model largely free from the omitted-variable bias that accompanies a typical factor model specification. Empirical tests using both firm- and portfoliolevel returns suggest the presence of mispricing in asset pricing. Applying the model to examine the profitability of two return-based investment strategies, we find that the momentum effect and the contrarian effect derive partially from the mispricing. Moreover, a zero-dollar investment strategy interacting the two effects is highly profitable when applied to both firm- and portfoliolevel returns, even after controlling for the three Fama-French factors, momentum and liquidity effects.
Mispricing linear asset pricing model time-varying risk premium momentum contrarian investment
Qiang Kang
Finance Department,University of Miami,Coral Gables,FL 33124-6552
国际会议
大连
英文
1-46
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）