Out of sample test of competing asset pricing models

• Main Authors: Barro Li, 李傑榕
• Other Authors: Pin-Huang Chou
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/76023912700718640074

碩士 === 國立中央大學 === 財務金融研究所 === 93 === Financial economists have extensively studied the cross-sectional stock return. Some economists consider certain factors that determine stock return. They think if there is high factor loading then the return increases and is controlled by covariance. This traditional asset pricing model is known as the “risk factor model”. Daniel and Titman argue that the stock return is more closely determined by “Characteristic model” than the risk factor model. For this research article, American stock market data from 1963 to 2002 was used. A “buy-and-hold” method was used to examine which asset pricing model would best predict the stock return. We compared the predictions of the stock return made by the factor model and the characteristic model. The results demonstrate that over one year the prediction of the stock return made by the characteristic model is more accurate than the prediction that the factor model. Over five years, there was no determination as to which model would make a more accurate prediction, but it was observed that the one factor model （CAPM）made an inaccurate prediction of the stock return.