TY - JOUR
T1 - Asset pricing models with conditional betas and alphas
T2 - The effects of data snooping and spurious regression
AU - Ferson, Wayne E.
AU - Sarkissian, Sergei
AU - Simin, Timothy
PY - 2008/6
Y1 - 2008/6
N2 - This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become biased. Previous studies overstate the significance of time-varying alphas.
AB - This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become biased. Previous studies overstate the significance of time-varying alphas.
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U2 - 10.1017/s0022109000003549
DO - 10.1017/s0022109000003549
M3 - Article
AN - SCOPUS:46849109129
SN - 0022-1090
VL - 43
SP - 331
EP - 354
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 2
ER -