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| Author: | Schrimpf, A. Schröder, M. |
| Title: | Cross-sectional tests of conditional asset pricing models: Evidence from the German stock market |
| Journal: | European Financial Management
2007 : NOV, VOL. 13:5, p. 880-907 |
| Index terms: | asset valuation pricing models stock markets Germany |
| Language: | eng |
| Abstract: | This paper explores the performance of conditional asset pricing models and multifactor models in explaining the German cross-section of stock returns, focusing on several variables associated with market expectations on future market excess returns or business cycle conditions. The results suggest that the empirical performance of the Capital Asset Pricing Model (CAPM) can be improved when allowing for time-varying parameters of the stochastic discount factor. A conditional CAPM using the term spread explains the returns on our size and book-to-market sorted portfolios approximately as well as the Fama-French three-factor model, performing best in terms of the Hansen-Jagannathan distance. |
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