The <mml:math xmlns:mml="http://www.w3.org/1998/Math/MathML" altimg="si45.svg"><mml:msup><mml:mi mathvariant="italic">q</mml:mi><mml:mn>5</mml:mn></mml:msup></mml:math> model and its consistency with the intertemporal CAPM

Lin, Qian

doi:10.1016/j.jbankfin.2021.106096

Cited by 7 publications

(3 citation statements)

References 67 publications

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“…However, because of the limited space, we can only test these four main factors in the model. For the future work, we can include other factors into the CAPM for the empirical verification such as the company profitability (see Guaita-Pradas and Blasco-Ruiz, 2020 [45]; Lin, 2021 [46]), especially the profitability of real estate companies as well the momentum factor (see Ayub et al, 2020 [47]; Nasir et al, 2021 [48]). In particular, we will focus on the momentum effect for the real estate sector.…”

Section: Discussionmentioning

confidence: 99%

Real Economy Effects on Consumption-Based CAPM

et al. 2022

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The consumption-based capital asset pricing model (CCAPM) is an attractive research field in finance, and extant studies have examined the impacts of different factors towards traditional CCAPM, intending to improve the model from the practical perspective. In this paper, we comprehensively scrutinize the real economy effects on the CCAPM by comprising expenditure on durable, expenditure on non-durable goods, services, and real estate four factors. Our study pays great attention to the real economy effect on the CCAPM based on two types of portfolios. By employing both time-series and cross-sectional analysis, our empirical results suggest that the real economy factors can help traditional CCAPM to produce better asset pricing results. Particularly, incorporating the real estate component into the CCAPM model can improve its explanation power on the stock market risk. Our results are potentially useful for investors, portfolios managers and policy makers towards the CCAPM.

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Section: Discussionmentioning

confidence: 99%

Real Economy Effects on Consumption-Based CAPM

et al. 2022

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“…They have identified that the risk-return relationships are correlated and sample firm returns are documented to be much less volatile and deviating than the market index. Qin tests the consistency of the q5 with Merton's intertemporal CAPM framework to conclude that it does not suffice to be theoretically applicable for the q5 model [9]. A typical sample of statistics for the return and factors is shown in Table . 1 and the correlations between the factors are given in Table . 2.…”

Section: Capm Modelmentioning

confidence: 99%

The Upgrading of CAPM Model: from Fama-French 3 Factors to Multi-factors

He¹

2023

BCPBM

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In general, financial theorem has always been particularly interested in the trade-off for dynamics of associated risk and expected return. This mystery had remained convoluted for decades until William Sharpe and John Lintner developed the first practical framework of the Capital Asset Pricing Models (CAPM). As a matter of fact, CAPM is founded on the idea that asset prices are influenced by inherent, risk free and market risk returns, and diversification of portfolios also benefited the investor for risk reduction. Since this finding, many advancements have been made beyond the initial models of CAPM such as the ICAPM and Fama French models. Thus, this paper presents founding theorems of the Capital Asset Pricing Model, discusses its historical advancements into different equations and demonstrate its potential limitations and future outlooks. To be specific, the principle and adding factors for the Fama French model of three factors, five factors and other quantity factors are discussed with the implementations and applications. Overall, these results provide historical summary as well as new insights for further exploration of assets pricing scenarios based on multi factorial concepts.

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“…The Sharpe-Linter-Black CAPM model (1964) supports this theory and states that the expected return is a positive linear function of beta, the risk free rate and the expected market return, while other researchers question the usefulness of the beta in predicting the expected return. More recently, Lin (2021) tested the consistency of a five-factor process as applied to an intertemporal CAPM model. Fama and French (1992) asserted that there is no systematic relationship between beta and security returns.…”

Section: Introductionmentioning

confidence: 99%

Time Dependence of CAPM Betas on the Choice of Interval Frequency and Return Timeframes: Is There an Optimum?

Agrrawal

Gilbert

Harkins

2022

JRFM

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The traditional CAPM beta is almost exclusively calculated over a return period that spans a window length of 60-months, at one-month return frequencies. It is one of the most utilized models in the asset management industry to assess systematic risk. Yet there is limited evidence to suggest that these estimation parameters are optimal. Utilizing data between January 2000 and December 2021 for the Russell 1000 index, we test daily, weekly, and monthly beta estimations to calculate tracking errors (TE) for the use of these betas in predicting subsequent performance over daily, weekly, and monthly timeframes. We identify that daily CAPM betas are best for predicting subsequent period daily returns and that weekly CAPM betas are strongly correlated with forward weekly and monthly period returns. Leveraging the significant advances in computing resources and the increasing utilization of high frequency trading strategies, we argue that additional window length and return interval-based CAPM betas should be calculated for estimating the systematic risk embedded in diversified portfolios.

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The q5 model and its consistency with the intertemporal CAPM

Cited by 7 publications

References 67 publications

Real Economy Effects on Consumption-Based CAPM

Real Economy Effects on Consumption-Based CAPM

The Upgrading of CAPM Model: from Fama-French 3 Factors to Multi-factors

Time Dependence of CAPM Betas on the Choice of Interval Frequency and Return Timeframes: Is There an Optimum?

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