Abstract
We test a conditional version of the CAPM in the U.S. equity market using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) model in which the risk premia, betas, and correlations vary through time. We introduce U.S. investor sentiment from two surveys as conditional information variables, whereas previous studies generally use economic fundamentals. We assume that investor sentiment is not entirely irrational and decompose it into its irrational and rational components; using the irrational components as information variables. We find that irrational investor sentiment measures are statistically significant, and contain information which may be valuable in asset pricing models.
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.
