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Testing Asset Pricing Models: The Case of Athens Stock Exchange

Author

Listed:
  • Antonis Demos

    (Athens University of Economics and Business, Greece)

  • Sofia Parissi

    (Athens University of Economics and Business, Greece)

Abstract
This article applies a conditionally heteroskedastic asset pricing model to describe the time variation in the first and second moments of asset returns in an interdependent way in the emerging capital market of Greece. Depending on the observability of the factors and under the chosen parameterization it is possible to derive tests to address economically important questions that the models impose on the risk-return relationship. We apply the derived tests on the nine sectorial portfolios and the value weighted index of the Athens Stock Exchange, over the period 1985-1997. The evidence from the unconditional and conditional CAPM, with the Value Weighted Index as a benchmark portfolio, suggests the inefficiency of the Index. On the other hand, the dynamic latent factor model, considered here, describes sectorial returns in a much better way. However, there is still a shadow of doubt on the hypothesis that the price of risk is common across assets.

Suggested Citation

  • Antonis Demos & Sofia Parissi, 1998. "Testing Asset Pricing Models: The Case of Athens Stock Exchange," Multinational Finance Journal, Multinational Finance Journal, vol. 2(3), pages 189-223, September.
    • Handle: RePEc:mfj:journl:v:2:y:1998:i:3:p:189-223
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    References listed on IDEAS

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    Cited by:

    1. Antonis Demos & George Vasillelis, 2007. "U.K. Stock Market Inefficiencies and the Risk Premium," Multinational Finance Journal, Multinational Finance Journal, vol. 11(1-2), pages 97-122, March-Jun.
    2. Joelle Miffre, 2008. "Conditional Risk Premia in International Government Bond Markets," Multinational Finance Journal, Multinational Finance Journal, vol. 12(3-4), pages 185-204, September.
    3. Athanassiou, Emmanuel & Kollias, Christos & Syriopoulos, Theodore, 2006. "Dynamic volatility and external security related shocks: The case of the Athens Stock Exchange," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(5), pages 411-424, December.
    4. Drakos, Konstantinos & Kutan, Ali M., 2001. "Opposites attract: The case of Greek and Turkish financial markets," ZEI Working Papers B 06-2001, University of Bonn, ZEI - Center for European Integration Studies.
    5. Nicholas Apergis & Sophia Eleptheriou, 2001. "Stock returns and volatility: Evidence from the Athens Stock market index," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 25(1), pages 50-61, March.

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    More about this item

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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