Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/97s-20.html
   My bibliography  Save this paper

Tests of Conditional Asset Pricing Models in the Brazilian Stock Market

Author

Listed:
  • Marco Bonomo
  • René Garcia
Abstract
In this paper, we test a verison of the conditional CAPM with respect to a local market portfolio, proxied by the Brazilian stock index during the period 1976-1992. We also test a conditional APT model by using the difference between the 30-day rate (Cdb) and the overnight rate as a second facton in addition to the market portfolio in order to capture the large inflation risk present during this period. The conditional CAPM and APT models are estimated by the Generalized Method of Moments (GMM) and tested on a set of size portfolios created from a total of 25 securities exchanged on the Brazilian markets. The inclusion of this second factor proves to be crucial for the appropriate pricing of the portfolios. Dans cet article, nous testons une version du CAPM conditionnel par rapport au portefeuille de marché local, approximé par un indice boursier brésilien, au cours de la période 1976-1992. Nous testons également un modèle APT conditionnel en utilisant la diférence entre les taux d'intérêt sur les dépôts de trente jours (Cdb) et le taux au jour le jour comme deuxième facteur en plus du portefeuille de marché pour capter l'important risque inflationniste présent durant cette période. Les modèles conditionnels CAPM et APT sont estimés par la méthode généralisée des moments (GMM) et testés sur un ensemble de portefeuilles construits selon la taille à partir d'un total de 25 titres échangés sur les marchés boursiers brésiliens. L'incorporation de ce deuxième facteur sa révèle cruciale pour une juste valorisation des portefeuilles.

Suggested Citation

  • Marco Bonomo & René Garcia, 1997. "Tests of Conditional Asset Pricing Models in the Brazilian Stock Market," CIRANO Working Papers 97s-20, CIRANO.
    • Handle: RePEc:cir:cirwor:97s-20
    as

    Download full text from publisher

    File URL: https://cirano.qc.ca/files/publications/97s-20.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Koenker, Roger & Machado, Jose A. F., 1999. "GMM inference when the number of moment conditions is large," Journal of Econometrics, Elsevier, vol. 93(2), pages 327-344, December.
    3. Engle, Robert F & Hendry, David F & Richard, Jean-Francois, 1983. "Exogeneity," Econometrica, Econometric Society, vol. 51(2), pages 277-304, March.
    4. Paglin, Morton & Rufolo, Anthony M, 1990. "Heterogeneous Human Capital, Occupational Choice, and Male-Female Earnings Differences," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 123-144, January.
    5. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
    6. Ghysels, E., 1995. "On Stable Factor Structurs in the Pricing of Risk," Cahiers de recherche 9525, Universite de Montreal, Departement de sciences economiques.
    7. Julian R. Betts & Laurel L. McFarland, 1995. "Safe Port in a Storm: The Impact of Labor Market Conditions on Community College Enrollments," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 741-765.
    8. Cati, Regina Celia & Garcia, Marcio G P & Perron, Pierre, 1999. "Unit Roots in the Presence of Abrupt Governmental Interventions with an Application to Brazilian Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(1), pages 27-56, Jan.-Feb..
    9. Cannings, K. & Montmarquette, C. & Mahseredjian, S., 1994. "Major Choice: Undergraduate Concentrations and the Probability of Graduation," Cahiers de recherche 9419, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    10. Zalokar, Nadja, 1988. "Male-Female Differences in Occupational Choice and the Demand for General and Occupation-Specific Human Capital," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 59-74, January.
    11. Orazem, Peter F & Mattila, J Peter, 1986. "Occupational Entry and Uncertainty: Males Leaving High School," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 265-273, May.
    12. Bodurtha, James N, Jr & Mark, Nelson C, 1991. "Testing the CAPM with Time-Varying Risks and Returns," Journal of Finance, American Finance Association, vol. 46(4), pages 1485-1505, September.
    13. Polachek, Solomon William, 1981. "Occupational Self-Selection: A Human Capital Approach to Sex Differences in Occupational Structure," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 60-69, February.
    14. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    15. Berger, Mark C., 1988. "Cohort size effects on earnings: Differences by college major," Economics of Education Review, Elsevier, vol. 7(4), pages 375-383, August.
    16. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
    17. Hartog, Joop & Pfann, Gerard & Ridder, Geert, 1989. "(Non-)graduation and the earnings function : An inquiry on self-selection," European Economic Review, Elsevier, vol. 33(7), pages 1373-1395, September.
    18. Saul Hoffman & Greg Duncan, 1988. "Multinomial and conditional logit discrete-choice models in demography," Demography, Springer;Population Association of America (PAA), vol. 25(3), pages 415-427, August.
    19. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    20. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    21. Garcia, Rene & Ghysels, Eric, 1998. "Structural change and asset pricing in emerging markets," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 455-473, June.
    22. Pierre Perron & Regina Cati & Marcio Gomes Pinto Garcia, 1995. "Unit roots in the presence of abrupt governmental interventions with an application to Brazilian to Brazilian data," Textos para discussão 349, Department of Economics PUC-Rio (Brazil).
    23. Bekaert, Geert & Harvey, Campbell R, 1995. "Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
    24. Ferson, Wayne E & Harvey, Campbell R, 1991. "The Variation of Economic Risk Premiums," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 385-415, April.
    25. Blakemore, Arthur E & Low, Stuart A, 1984. "Sex Differences in Occupational Selection: The Case of College Majors," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 157-163, February.
    26. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-481, June.
    27. Charles F. Manski, 1993. "Adolescent Econometricians: How Do Youth Infer the Returns to Schooling?," NBER Chapters, in: Studies of Supply and Demand in Higher Education, pages 43-60, National Bureau of Economic Research, Inc.
    28. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
    29. Rumberger, Russell W. & Thomas, Scott L., 1993. "The economic returns to college major, quality and performance: A multilevel analysis of recent graduates," Economics of Education Review, Elsevier, vol. 12(1), pages 1-19, March.
    30. Ferson, Wayne E & Korajczyk, Robert A, 1995. "Do Arbitrage Pricing Models Explain the Predictability of Stock Returns?," The Journal of Business, University of Chicago Press, vol. 68(3), pages 309-349, July.
    31. Francine D. Blau & Marianne A. Ferber, 1991. "Career Plans and Expectations of Young Women and Men: The Earnings Gap and Labor Force Participation," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 581-607.
    32. Kodde, David A, 1986. "Uncertainty and the Demand for Education," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 460-467, August.
    33. Harvey, Campbell R, 1991. "The World Price of Covariance Risk," Journal of Finance, American Finance Association, vol. 46(1), pages 111-157, March.
    34. Peter Rupert & Mark E. Schweitzer & Eric K. Severance-Lossin & Erin Turner, 1996. "Earnings, education and experience," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-12.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grandes, Martin & Panigo, Demian T. & Pasquini, Ricardo A., 2010. "On the estimation of the cost of equity in Latin America," Emerging Markets Review, Elsevier, vol. 11(4), pages 373-389, December.
    2. Eurilton Araújo & Ricardo D. Brito & Antonio Z. Sanvicente, 2021. "Long‐term stock returns in Brazil: Volatile equity returns for U.S.‐like investors," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6249-6263, October.
    3. Garcia, Rene & Ghysels, Eric, 1998. "Structural change and asset pricing in emerging markets," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 455-473, June.
    4. Cavalcante-Filho, Elias & Chague, Fernando & De-Losso, Rodrigo & Giovannetti, Bruno, 2022. "US risk premia under emerging markets constraints," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 217-230.
    5. Carrasco Gutierrez, Carlos Enrique & Peixoto Messias, Iasmin Emillyn, 2022. "Macroeconomic factors and value and growth strategies: evidence from Brazil," MPRA Paper 114875, University Library of Munich, Germany.
    6. Rafique, Amir & Iqbal, Khurram & Zakaria, Muhammad & Mujtaba, Ghulam, 2019. "Investigating ICAPM with mean-reverting dynamic conditional correlation: Evidence from an emerging stock exchange," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 514-523.
    7. Tabak, Benjamin M. & Staub, Roberta B., 2007. "Assessing financial instability: The case of Brazil," Research in International Business and Finance, Elsevier, vol. 21(2), pages 188-202, June.
    8. Angelo M. Fasolo & Marcelo Savino Portugal, 2003. "Imperfect Rationality and Inflationary Inertia: a New Estimation of the Phillips Curve for Brazil," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] b34, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    9. Andrade, Sandro C., 2009. "A model of asset pricing under country risk," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 671-695, June.
    10. Octavio Portolano Machado & Adriana Bruscato Bortoluzzo & Sérgio Ricardo Martins & Antonio Zoratto Sanvicente, 2013. "Inter-temporal CAPM: an empirical test with Brazilian market data," Brazilian Review of Finance, Brazilian Society of Finance, vol. 11(2), pages 149-180.
    11. Garcia, René, 1998. "Modèles d’évaluation des actifs financiers dans les marchés boursiers en émergence : identification des facteurs de risque et tests de changement structurel," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(3), pages 467-484, septembre.
    12. Atakan Yalçın & Nuri Ersşahin, 2011. "Does the Conditional CAPM Work? Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(4), pages 28-48, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Montmarquette, Claude & Cannings, Kathy & Mahseredjian, Sophie, 2002. "How do young people choose college majors?," Economics of Education Review, Elsevier, vol. 21(6), pages 543-556, December.
    2. Garcia, René, 1998. "Modèles d’évaluation des actifs financiers dans les marchés boursiers en émergence : identification des facteurs de risque et tests de changement structurel," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(3), pages 467-484, septembre.
    3. Wayne E. Ferson & Ravi Jagannathan, 1996. "Econometric evaluation of asset pricing models," Staff Report 206, Federal Reserve Bank of Minneapolis.
    4. Korkmaz, Turhan & Cevik, Emrah Ismail & Gurkan, Serhan, 2010. "Testing the international capital asset pricing model with Markov switching model in emerging markets," MPRA Paper 71481, University Library of Munich, Germany, revised 2010.
    5. Boyer, Marcel & Cherkaoui, Mouna & Ghysels, Eric, 1997. "L’intégration des marchés émergents et la modélisation des rendements des actifs risqués," L'Actualité Economique, Société Canadienne de Science Economique, vol. 73(1), pages 311-330, mars-juin.
    6. Kim Nummelin & Mika Vaihekoski, 2002. "World capital markets and Finnish stock returns," The European Journal of Finance, Taylor & Francis Journals, vol. 8(3), pages 322-343.
    7. Mika Vaihekoski, 1998. "Short-term returns and the predictability of Finnish stock returns," Finnish Economic Papers, Finnish Economic Association, vol. 11(1), pages 19-36, Spring.
    8. Ghysels, E., 1995. "On Stable Factor Structurs in the Pricing of Risk," Cahiers de recherche 9525, Universite de Montreal, Departement de sciences economiques.
    9. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The Performance of International Equity Portfolios," International Finance Discussion Papers 817, Board of Governors of the Federal Reserve System (U.S.).
    10. Garcia, Rene & Ghysels, Eric, 1998. "Structural change and asset pricing in emerging markets," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 455-473, June.
    11. Ho-Chuan Huang & Wan-hsiu Cheng, 2005. "Tests of the CAPM under structural changes," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 523-541.
    12. Li, Yuming, 1998. "Expected stock returns, risk premiums and volatilities of economic factors1," Journal of Empirical Finance, Elsevier, vol. 5(2), pages 69-97, June.
    13. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
    14. Kodongo, Odongo & Ojah, Kalu, 2014. "The conditional pricing of currency and inflation risks in Africa's equity markets," MPRA Paper 56100, University Library of Munich, Germany.
    15. Luzi Hail & Christian Leuz, 2006. "International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?," Journal of Accounting Research, Wiley Blackwell, vol. 44(3), pages 485-531, June.
    16. Wolfgang Drobetz & Dirk Schilling & Lars Tegtmeier, 2010. "Common risk factors in the returns of shipping stocks," Maritime Policy & Management, Taylor & Francis Journals, vol. 37(2), pages 93-120, March.
    17. Amit Goyal, 2012. "Empirical cross-sectional asset pricing: a survey," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 26(1), pages 3-38, March.
    18. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2007. "Liquidity and Expected Returns: Lessons from Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1783-1831, November.
    19. Rua, António & Nunes, Luis C., 2012. "A wavelet-based assessment of market risk: The emerging markets case," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(1), pages 84-92.
    20. Hodrick, Robert J & Vassalou, Maria, 2001. "Do We Need Multi-Country Models to Explain Exchange Rate, Interest Rate and Bond Return Dynamics?," CEPR Discussion Papers 3056, C.E.P.R. Discussion Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:97s-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/ciranca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.