On February 5th from 11:00 to 12.00 Valentina Raponi from the Imperial College will give a seminar on "Testing Beta-Pricing Models Using Large Cross-Sections".

The event will take place in room B, first floor, building B.

Abstract:

We propose a methodology for estimating and testing beta-pricing models when a large number of assets is available for investment but the number of time-series observations is fixed. We first consider the case of correctly specified models with constant risk premia, and then extend our framework to deal with time-varying risk premia, potentially misspecified models, firm characteristics, and unbalanced panels. We show that our large cross-sectional framework poses a serious challenge to common empirical findings regarding the validity of beta-pricing models. Firm characteristics are found to explain a much larger proportion of variation in estimated expected returns than betas.