scholarly journals Observable Implications of the Conditional CAPM

2020 ◽  
Author(s):  
Thiago de Oliveira Souza
Keyword(s):  
Conditional Capm

Patent Thickets, Stock Returns, and Conditional CAPM

2022 ◽  
Author(s):  
Po-Hsuan Hsu ◽  
Hsiao-Hui Lee ◽  
Tong Zhou
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Capital Asset Pricing ◽  
Stochastic Discount Factor ◽  
Aggregate Productivity ◽  
Capital Asset ◽  
Conditional Capm ◽  
Asset Pricing Model ◽  
Patent Rights ◽  
Patent Thickets

Patent thickets, a phenomenon of fragmented ownership of overlapping patent rights, hamper firms’ commercialization of patents and thus deliver asset pricing implications. We show that firms with deeper patent thickets are involved in more patent litigations, launch fewer new products, and become less profitable in the future. These firms are also associated with lower subsequent stock returns, which can be explained by a conditional Capital Asset Pricing Model (CAPM) based on a general equilibrium model that features heterogeneous market betas conditional on time-varying aggregate productivity. This explanation is supported by further evidence from factor regressions and stochastic discount factor tests. This paper was accepted by Karl Diether, finance.

scholarly journals Contribution to the Valuation of BRVM’s Assets: A Conditional CAPM Approach

2019 ◽  
Vol 12 (1) ◽  
pp. 27 ◽  
Author(s):  
Mamadou Cisse ◽  
Mamadou Konte ◽  
Mohamed Toure ◽  
Smael Assani
Keyword(s):  
Kalman Filter ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Capital Asset Pricing ◽  
Conditional Capm ◽  
Asset Pricing Model ◽  
Market Portfolio ◽  
High Volatility ◽  
Size Criterion ◽  
Better Than

The conditional capital asset pricing model (CAPM) theory postulates that the systematic risk ( β ) of an asset or portfolio varies over time. Several dynamics are thus given to systematic risk in the literature. This article looks for the dynamic that seems to best explain the returns of the assets of the Regional Stock Exchange of West Africa (BRVM) by comparing two dynamics: one by the Kalman filter (assuming that the β follow a random walk) and the other by the Markov switching (MS) model (assuming that β varies according to regimes) for four portfolios of the BRVM. Having found a link between the beta of the market portfolio and the size criterion (measured by capitalization), the two previous models were re-estimated with the addition of the SMB (Small Minus Big) variable. The results show according to the RMSE criterion that the estimation by the Kalman filter fits better than MS, which suggests that investors cannot anticipate systematic risk because of its high volatility.

scholarly journals Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns

2020 ◽  
Vol 12 (22) ◽  
pp. 9721
Author(s):  
Ana Belén Alonso-Conde ◽  
Javier Rojo-Suárez
Keyword(s):  
Stock Returns ◽  
Factor Model ◽  
Large Fraction ◽  
Factor Models ◽  
Cross Sectional ◽  
Risk Premiums ◽  
Conditional Capm ◽  
Equity Risk ◽  
The Cross ◽  
The Cost

Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing model (CAPM) conditional on the event of nuclear disasters with that of the classic CAPM and the Fama–French three- and five-factor models. In order to control for nuclear disasters, we use an instrument that allows us to parameterize the linear stochastic discount factor of the conditional CAPM and transform the classic CAPM into a three-factor model. In this regard, the use of nuclear disasters as an explanatory variable for the cross-sectional behavior of stock returns is a novel contribution of this research. Our results suggest that nuclear disasters account for a large fraction of the variation of stock returns, allowing the CAPM to perform similarly to the Fama–French three- and five-factor models. Furthermore, our results show that, in general, nuclear disasters are positively related to the expected returns of a large number of assets under study. Our results have important implications for the task of estimating the cost of equity and constitute a step forward in understanding the relationship between equity risk premiums and nuclear disasters.

Sign in / Sign up

Export Citation Format

Share Document