A0151
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 is proposed for testing coefficients constancy in varying coefficient capital asset pricing models with endogenous regressors. The testing procedure is defined as a generalized likelihood ratio that focuses on the comparison of the restricted and unrestricted sum of squared residuals. As a by-product, we have developed a nonparametric method that takes into account the endogenous nature of the regressors to estimate the prices of risk; besides, we establish the asymptotic properties of the estimators. We also investigate the finite sample properties of our test by means of Monte Carlo experiments study and using critical values and p-values estimated using a bootstrap technique. Finally, we apply our test to the Fama and French model using a Fama-French 6 portfolio, sorted by size and book-to-market.
