Abstract
What explains the cross section of expected returns for the 25 size/value Fama–French (FF) portfolios? It is found that modelling time-varying betas is important to explain the cross section of expected returns, as well as to comply with the time series restriction on Jensen-alpha. Support for a modified version of the conditional Jagannathan and Wang's (1996) Capital Asset Pricing Model (CAPM) is found, where implementation is carried out in the realized beta framework proposed in this article. About 63% of the cross-sectional variability of the expected returns for the 25 FF size and value sorted portfolios is then found to be explained by this parsimonious two-variable model.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
