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The conditional CAPM and the cross section of expected returns : evidence for the Canadian market

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The conditional CAPM and the cross section of expected returns : evidence for the Canadian market

Margellos, Athanasios S (1998) The conditional CAPM and the cross section of expected returns : evidence for the Canadian market. Masters thesis, Concordia University.

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Abstract

In this study we test a conditional version of the CAPM, proposed by Jagannathan and Wang (1996), that allows betas (Ý) to vary over time as proxied by the yield spread between three-month Prime Corporate Paper and the three-month T-Bill rate ([Special characters omitted.] ). The model also includes a measure of the sensitivity of human capital to the market Ý as proxied by the lagged return on Total Labor Income ([Special characters omitted.] ), and SIZE (log of share price times number of shares outstanding) as explanatory variables. Our objective is twofold: (a) to test this model's ability to better explain the cross-sectional variation of monthly returns on 25 SIZE - and beta -sorted portfolios of Canadian common stocks over the period from June 1965 to December 1992 (330 months); and (b) to compare the performance of this conditional CAPM with the unconditional CAPM (SLB model). For portfolio formation, we use a methodology similar to Fama and French (1992). For the estimation procedure, we use the two-step approach of Fama and MacBeth (1973) as well as the more powerful GLS time-series cross-sectional estimation approach. (Abstract shortened by UMI.)

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Margellos, Athanasios S
Pagination:v, 37, [18] leaves ; 29 cm.
Institution:Concordia University
Degree Name:Theses (M.Sc.Admin.)
Program:Faculty of Commerce and Administration
Date:1998
Thesis Supervisor(s):Kryzanowski, Lawrence D
ID Code:581
Deposited By:Concordia University Libraries
Deposited On:27 Aug 2009 13:12
Last Modified:08 Dec 2010 10:15
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