General Tests of Latent Variable Models and Mean-Variance Spanning
- 1 March 1993
- journal article
- research article
- Published by JSTOR in The Journal of Finance
- Vol. 48 (1) , 131-156
- https://doi.org/10.2307/2328884
Abstract
The methods of Gibbons and Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean‐variance spanning generalizes Huberman and Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size‐based common stock portfolios proxy for the risk factors, we reject the hypothesis that four of them describe the conditional expected returns of the other assets.All Related Versions
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