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Can An "Estimation Factor" Help Explain Cross-Sectional Returns?

Publiceringsår: 2009
Språk: Engelska
Sidor: 705-724
Publikation/Tidskrift/Serie: Journal of Business, Finance & Accounting
Volym: 36
Nummer: 5-6
Dokumenttyp: Artikel
Förlag: Wiley-Blackwell Publishing, Inc


We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model by using GMM and compare it to the CAPM. The results suggest that adding an "estimation factor" to the CAPM helps in explaining cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium.



  • Business and Economics
  • equilibrium
  • learning
  • incomplete information
  • asset pricing models


  • ISSN: 0306-686X

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