Asset Pricing Test Using Alternative Sets of Portfolios: Evidence from India

Sudipta Das
  • Asia-Pacific Financial Markets, January 2019, Springer Science + Business Media
  • DOI: 10.1007/s10690-018-09268-8

Empirical test of asset-pricing models using alternative sets of portfolios

Photo by Sharon McCutcheon on Unsplash

Photo by Sharon McCutcheon on Unsplash

What is it about?

Empirical test of asset-pricing models are typically performed on portfolios based on firm-characteristics such as size and book-to-market ratios etc. However, because of their strong factor structure, the characteristic sorted portfolios do not provide a sufficient test for asset pricing models. To address this issue, we construct three sets of test portfolios sorted by firm beta, volatility, and clustering method to test various asset pricing models.

Why is it important?

In recent, the appropriateness to use characteristics sorted portfolios has been debated. Literature suggests various alternative test portfolios sorted by other attributes to improve the empirical tests.

Perspectives

Mr Sudipta Das
Indian Institute of Information Technology Allahabad

I hope this article will add points with the existing literature and will generate thought-provoking debates.

Read Publication

http://dx.doi.org/10.1007/s10690-018-09268-8

The following have contributed to this page: Mr Sudipta Das