A Best Choice Among Asset Pricing Models? The Conditional Capital Asset Pricing Model in Australia

Durack, Nick; Durand, Robert B. B.; Maller, Ross

A Best Choice Among Asset Pricing Models? The Conditional Capital Asset Pricing Model in Australia

Accounting and Finance, Vol. 44, No. 2, pp. 139-162, July 2004

24 Pages Posted: 8 Jul 2004

See all articles by Nick Durack

Robert B. B. Durand

Curtin University of Technology - School of Economics and Finance - Department of Finance and Banking

Ross Maller

Australian National University (ANU) - School of Finance and Applied Statistics

Abstract

We use Australian data to test the Conditional Capital Asset Pricing Model (Jagannathan and Wang, 1996). Our results are generally supportive: the model performs well compared with a number of competing asset pricing models. In contrast to the study by Jagannathan and Wang, however, we find that the inclusion of the market for human capital does not save the concept of the time-independent market beta (it remains insignificant). We find support for the role of a small-minus-big factor in pricing the cross-section of returns and find grounds to disagree with Jagannathan and Wang's argument that this factor proxies for misspecified market risk.

Keywords: Asset pricing, Australia, conditional CAPM, APT

JEL Classification: G12

Suggested Citation: Suggested Citation

Durack, Nick and Durand, Robert B. B. and Maller, Ross, A Best Choice Among Asset Pricing Models? The Conditional Capital Asset Pricing Model in Australia. Accounting and Finance, Vol. 44, No. 2, pp. 139-162, July 2004. Available at SSRN: https://ssrn.com/abstract=544292