Non-nested Tests of Asset Pricing Models

• Main Authors: Jin-pon Huang, 黃進鵬
• Other Authors: Pin-Huang Chou
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/v47488

碩士 === 國立中央大學 === 財務金融研究所 === 97 === Many asset pricing models have been proposed to fit the asset returns in the literature, but few studies discuss the relative performance between them. Non-nested model specification tests provide the econometric tools to compare the performance of many models. Of many asset pricing models, we choose popular Fama-French three factor model, Ferguson and Shockley’s model, Liu’s liquidity-augmented model and Petkova’s model as competing models. The results are different with 25 size- and B/M- sorted returns and 12 industry returns. When using 25 portfolio returns, the result has the pattern that the later proposed model has the better ability to explain the variation on returns. While the 12 industry returns is used, Liu’s liquidityaugmented model tends to be the worst model to fit the returns.