A Cross-Sectional Test of an Investment-Based Asset Pricing Model
Year: 1996
Type: preprint
Abstract: I examine a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. I examine the model's ability to explain variation in expected returns across asset and over time. The model is not rejected. It performs about as well as the CAPM and the Chen, Roll, and Ross factor model, and it performs substantially better than a simple consumption-based model. I also provide an easy technique for estimating and testing dynamic, conditional asset pricing models--one simply includes factors and returns scaled by instruments in an unconditional estimate--and for comparing such models.
Source: SSRN Electronic Journal
Author: John H. Cochrane
Institutions: Hoover Institution, National Bureau of Economic Research
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122931934