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2007•Applied Financial EconomicsRequires access

Asset pricing models: a comparison

Edward R. Lawrence, John M. Geppert, Arun J. Prakash

Open publisher page 19 citations

Abstract

We empirically test and compare the performance of the traditional capital asset pricing model (CAPM), the three-moment CAPM and the Fama–French (FF) three-factor model using the FF 25 portfolios data. Based on the time-series and the cross-sectional tests, the FF three-factor model outperforms the other models. In the cross-sectional tests, the three-moment CAPM has a higher R 2 than CAPM but in the time-series regression, the performances of CAPM and the three-moment CAPM are comparable.

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What this paper is about

We empirically test and compare the performance of the traditional capital asset pricing model (CAPM), the three-moment CAPM and the Fama–French (FF) three-factor model using the FF 25 portfolios data. Based on the time-series and the cross-sectional tests, the FF three-factor model outperforms the other models. In the cross-sectional tests, the three-moment CAPM has a higher R 2 than CAPM but in the time-series regression, the performances of CAPM and the three-moment CAPM are comparable.

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OpenAlex reports 19 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

We empirically test and compare the performance of the traditional capital asset pricing model (CAPM), the three-moment CAPM and the Fama–French (FF) three-factor model using the FF 25 portfolios data. Based on the time-series and the cross-sectional tests, the FF three-factor model outperforms the other models. In the cross-sectional tests, the three-moment CAPM has a higher R 2 than CAPM but in the time-series regression, the performances of CAPM and the three-moment CAPM are comparable.

Key concepts: Capital asset pricing model, Economics, Econometrics, Moment (physics), Consumption-based capital asset pricing model, Financial economics, Physics, Classical mechanics

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