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CAPM Over the Long-Run: 1926-2001

Andrew Ang

BlackRock, Inc

Joseph Chen

University of California, Davis - Graduate School of Management

January 21, 2003

AFA 2004 San Diego Meetings

Over the long-run from 1926 to 2001, the CAPM can account for the spread in the returns of portfolios sorted by book-to-market ratios. In contrast, using data covering the period after 1963, many studies find strong evidence of a book-to-market effect using conventional asymptotic standard errors. To conduct correct small sample inference, we estimate a conditional CAPM with time-varying betas and find that post-1963 book-to-market effect is statistically insignificant. We find some evidence of a book-to-market effect among medium-sized stocks, but not among the smallest stocks. We also find that while the momentum effect is robust to small sample biases, the reversal effect is not.

Number of Pages in PDF File: 41

Keywords: book-to-market effect, value effect, conditional CAPM, momentum effect, reversal effect, time-varying beta

JEL Classification: C51, G12

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Date posted: November 23, 2003  

Suggested Citation

Ang, Andrew and Chen, Joseph, CAPM Over the Long-Run: 1926-2001 (January 21, 2003). AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=346600 or http://dx.doi.org/10.2139/ssrn.346600

Contact Information

Andrew Ang
BlackRock, Inc ( email )
55 East 52nd Street
New York City, NY 10055
United States
Joseph S. Chen (Contact Author)
University of California, Davis - Graduate School of Management ( email )
One Shields Avenue
Davis, CA 95616
United States
(530) 752-7155 (Phone)
(530) 752-2924 (Fax)

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