Department of Economics and Business Economics

Asset pricing model uncertainty

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Standard

Asset pricing model uncertainty. / Borup, Daniel.

In: Journal of Empirical Finance, Vol. 54, 12.2019, p. 166-189.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Borup, D 2019, 'Asset pricing model uncertainty', Journal of Empirical Finance, vol. 54, pp. 166-189. https://doi.org/10.1016/j.jempfin.2019.07.005

APA

CBE

MLA

Vancouver

Author

Borup, Daniel. / Asset pricing model uncertainty. In: Journal of Empirical Finance. 2019 ; Vol. 54. pp. 166-189.

Bibtex

@article{500d8c2ee40444c89e519ac16639c76d,
title = "Asset pricing model uncertainty",
abstract = "This paper provides a unified calendar-time portfolio methodology for assessing whether returns following an event are abnormal which efficiently handles asset pricing model uncertainty and allows for time-varying alpha and factor exposures. The approach disciplines researchers’ use of asset pricing factors and assigns a probability measure to the appropriateness of (dynamically) selecting a single model that best approximates the true factor structure or whether model averaging across an asset pricing universe is desired. It is applied to the long-horizon effect of dividend initiations and resumptions in the 1980 to 2015 period. Resulting post-announcement conditional abnormal returns are generally significant, statistically and economically, which contrasts recent evidence, and exhibits a break in mean from positive until the mid-1990s and negative onwards. We document substantial time-variation in the dimensionality and composition of the factor structure in expected returns, which goes beyond what captured by conditional versions of the CAPM and Fama–French specifications. This also generalizes to a large panel of 202 characteristics-sorted portfolios.",
keywords = "Abnormal returns, Calendar-time portfolio returns, Conditional asset pricing, Dividend initiations, Event study, Model uncertainty",
author = "Daniel Borup",
note = "AM haves fra Elsevier",
year = "2019",
month = "12",
doi = "10.1016/j.jempfin.2019.07.005",
language = "English",
volume = "54",
pages = "166--189",
journal = "Journal of Empirical Finance",
issn = "0927-5398",
publisher = "Elsevier BV",

}

RIS

TY - JOUR

T1 - Asset pricing model uncertainty

AU - Borup, Daniel

N1 - AM haves fra Elsevier

PY - 2019/12

Y1 - 2019/12

N2 - This paper provides a unified calendar-time portfolio methodology for assessing whether returns following an event are abnormal which efficiently handles asset pricing model uncertainty and allows for time-varying alpha and factor exposures. The approach disciplines researchers’ use of asset pricing factors and assigns a probability measure to the appropriateness of (dynamically) selecting a single model that best approximates the true factor structure or whether model averaging across an asset pricing universe is desired. It is applied to the long-horizon effect of dividend initiations and resumptions in the 1980 to 2015 period. Resulting post-announcement conditional abnormal returns are generally significant, statistically and economically, which contrasts recent evidence, and exhibits a break in mean from positive until the mid-1990s and negative onwards. We document substantial time-variation in the dimensionality and composition of the factor structure in expected returns, which goes beyond what captured by conditional versions of the CAPM and Fama–French specifications. This also generalizes to a large panel of 202 characteristics-sorted portfolios.

AB - This paper provides a unified calendar-time portfolio methodology for assessing whether returns following an event are abnormal which efficiently handles asset pricing model uncertainty and allows for time-varying alpha and factor exposures. The approach disciplines researchers’ use of asset pricing factors and assigns a probability measure to the appropriateness of (dynamically) selecting a single model that best approximates the true factor structure or whether model averaging across an asset pricing universe is desired. It is applied to the long-horizon effect of dividend initiations and resumptions in the 1980 to 2015 period. Resulting post-announcement conditional abnormal returns are generally significant, statistically and economically, which contrasts recent evidence, and exhibits a break in mean from positive until the mid-1990s and negative onwards. We document substantial time-variation in the dimensionality and composition of the factor structure in expected returns, which goes beyond what captured by conditional versions of the CAPM and Fama–French specifications. This also generalizes to a large panel of 202 characteristics-sorted portfolios.

KW - Abnormal returns

KW - Calendar-time portfolio returns

KW - Conditional asset pricing

KW - Dividend initiations

KW - Event study

KW - Model uncertainty

U2 - 10.1016/j.jempfin.2019.07.005

DO - 10.1016/j.jempfin.2019.07.005

M3 - Journal article

VL - 54

SP - 166

EP - 189

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

SN - 0927-5398

ER -