Capital Market Equilibrium with Restricted Borrowing

Black, Fischer

doi:10.1086/295472

Cited by 2,491 publications

(1,355 citation statements)

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“…The most frequently cited modi®cation is by Black (1972), who shows how the model needs to be adapted when riskless borrowing is not available; his version is known as the zero-beta CAPM. Another important variant is by Brennan (1970), who ®nds that the structure of the original CAPM is retained when taxes are introduced into the equilibrium.…”

Section: The Capital Asset Pricing Modelmentioning

confidence: 99%

Three Centuries Of Asset Pricing

Dimson

Mussavian²

2000

SSRN Journal

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Theory on the pricing of ®nancial assets can be traced back to Bernoulli's famous St Petersburg paper of 1738. Since then, research into asset pricing and derivative valuation has been in¯uenced by a couple of dozen major contributions published during the twentieth century. These seminal works have underpinned the key ideas of mean± variance optimisation, equilibrium analysis and no-arbitrage arguments. This paper presents a historical review of these important contributions to ®nance. Ó 1999 Elsevier Science B.V. All rights reserved.

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Section: The Capital Asset Pricing Modelmentioning

confidence: 99%

Three Centuries Of Asset Pricing

Dimson

Mussavian²

2000

SSRN Journal

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“…The traditional Capital Asset Pricing Model (CAPM), developed by Sharpe (1964), Lintner (1965) and Black (1972), explains the positive linear relationship between beta (the covariance of asset return and market return) and asset returns. Fama and French (1992), on the other hand, fail to document the relationship between beta and stock returns.…”

Section: Introductionmentioning

confidence: 99%

The cross-sectional relationship between stock returns and domestic and global factors in the Chinese A-share market

Wang

Iorio

2007

Rev Quant Finan Acc

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“…Well known applications include work on asset-pricing based on the Arbitrage Pricing Theory (APT) and factor models (Black, 1972;Ross, 1976) 1 . From a methodological perspective, RR restrictions raise statistical challenges.…”

Section: Introductionmentioning

confidence: 99%

Identification-Robust Factor Pricing: Canadian Evidence

Beaulieu

Dufour

Khalaf

2016

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We analyze factor models based on the Arbitrage Pricing Theory (APT). using identification-robust inference methods. Such models involve nonlinear reduced-rank restrictions whose identification may raise serious non-regularities and lead to a failure of standard asymptotic theory. We build confidence sets for structural parameters based on inverting Hotelling-type pivotal statistics. These confidence sets provide much more information than the corresponding tests. Our approach may be interpreted as a multivariate extension of the Fieller method for inference on mean ratios. We also introduce a formal definition for a redundant factor linking the presence of such factors to unbounded confidence sets, and we document their perverse effects on minimum-root-based model tests.Results are applied to multifactor asset-pricing models with Canadian data, the Fama-French-Carhart benchmarks and monthly returns of 25 portfolios from 1991 to 2010. Despite evidence of weak identification, several findings deserve notice when data are analyzed over ten-year subperiods. With equally weighted portfolios, the three-factor model is rejected before 2000, but weakly supported thereafter. In contrast, the three-factor model is not rejected with value-weighted portfolios. Interestingly in this case, the market factor is priced before 2000 along with size, while both Fama-French factors are priced thereafter. The momentum factor severely compromises identification, which calls for caution in interpreting existing work documenting momentum effects on the Canadian market. This empirical analysis underscores the practical usefulness of our analytical confidence sets

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Capital Market Equilibrium with Restricted Borrowing

Cited by 2,491 publications

References 1 publication

Three Centuries Of Asset Pricing

Three Centuries Of Asset Pricing

The cross-sectional relationship between stock returns and domestic and global factors in the Chinese A-share market

Identification-Robust Factor Pricing: Canadian Evidence

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