The Determinants of Risk Premia on the Italian Stock Market: Empirical Evidence on Common Factors in Asset Pricing Models

2012 ◽  
Author(s):  
Paola Brighi ◽  
Stefano d'Addona ◽  
Antonio Carlo Francesco Della Bina
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Empirical Evidence ◽  
Common Factors ◽  
Risk Premia ◽  
Pricing Models ◽  
Asset Pricing Models

scholarly journals Corporate sustainability and asset pricing models: empirical evidence for the Brazilian stock market

Production ◽  
2016 ◽  
Vol 26 (3) ◽  
pp. 516-526 ◽  
Author(s):  
Vitor Gonçalves de Azevedo ◽  
André Alves Portela Santos ◽  
Lucila Maria de Souza Campos
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Empirical Evidence ◽  
Corporate Sustainability ◽  
Pricing Models ◽  
Asset Pricing Models

Using Stocks or Portfolios in Tests of Factor Models

2019 ◽  
Vol 55 (3) ◽  
pp. 709-750 ◽  
Author(s):  
Andrew Ang ◽  
Jun Liu ◽  
Krista Schwarz
Keyword(s):  
Asset Pricing ◽  
Risk Premia ◽  
Factor Models ◽  
Idiosyncratic Volatility ◽  
Standard Errors ◽  
Coefficient Estimates ◽  
Pricing Models ◽  
Cross Sectional ◽  
Factor Loadings ◽  
Asset Pricing Models

We examine the efficiency of using individual stocks or portfolios as base assets to test asset pricing models using cross-sectional data. The literature has argued that creating portfolios reduces idiosyncratic volatility and allows more precise estimates of factor loadings, and consequently risk premia. We show analytically and empirically that smaller standard errors of portfolio beta estimates do not lead to smaller standard errors of cross-sectional coefficient estimates. Factor risk premia standard errors are determined by the cross-sectional distributions of factor loadings and residual risk. Portfolios destroy information by shrinking the dispersion of betas, leading to larger standard errors.

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