A0214
Title: Testing beta constancy in capital asset pricing models
Authors: Luis Antonio Arteaga Molina - Universidad de Cantabria (Spain) [presenting]
Juan Manuel Rodriguez-Poo - Universidad de Cantabria (Spain)
Abstract: A methodology for testing coefficient constancy in varying coefficient capital asset pricing models with endogenous regressors is proposed. The testing procedure is defined as a generalized likelihood ratio that compares the restricted and unrestricted sum of squared residuals. As a by-product, a nonparametric method that considers the endogenous nature of the regressors has developed to estimate the prices of risk; besides, the asymptotic properties of the estimators are established. The finite sample properties of the test by means of Monte Carlo experiments study and using critical values and p-values estimated using a bootstrap technique are also investigated. Finally, the test is applied to the Fama and French's model using a Fama-French 6 portfolio, sorted by size and book-to-market.
