Analytical GMM Tests: Asset Pricing with Time-Varying Risk Premiums

REVIEW OF FINANCIAL STUDIES, Vol 7 No 4, 1994

Posted: 24 Apr 1998

See all articles by Guofu Zhou

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School; China Academy of Financial Research (CAFR)

Abstract

We propose alternative GMM tests that are analytically solvable in many econometric models, yielding in particular analytical GMM tests for asset pricing models with time- varying risk premiums. We also provide simulation evidence showing that the proposed tests have good finite sample properties and that their asymptotic distribution is reliable for the sample size commonly used. We apply our tests to study the number of latent factors in the predictable variations of the returns on portfolios grouped by industries. Using data from October 1941 to September 1986 and two sets of instrumental variables, we find that the tests reject a one-factor model but not a two-factor model.

JEL Classification: G12

Suggested Citation

Zhou, Guofu, Analytical GMM Tests: Asset Pricing with Time-Varying Risk Premiums. REVIEW OF FINANCIAL STUDIES, Vol 7 No 4, 1994, Available at SSRN: https://ssrn.com/abstract=5396

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

China Academy of Financial Research (CAFR)

Shanghai Advanced Institute of Finance
Shanghai P.R.China, 200030
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
695
PlumX Metrics