Asset pricing models and financial market anomalies

Doron Avramov*, Tarun Chordia

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

243 Scopus citations

Abstract

This article develops a framework that applies to single securities to test whether asset pricing models can explain the size, value, and momentum anomalies. Stock level beta is allowed to vary with firm-level size and book-to-market as well as with macroeconomic variables. With constant beta, none of the models examined capture any of the market anomalies. When beta is allowed to vary, the size and value effects are often explained, but the explanatory power of past return remains robust. The past return effect is captured by model mispricing that varies with macroeconomic variables.

Original languageAmerican English
Pages (from-to)1001-1040
Number of pages40
JournalReview of Financial Studies
Volume19
Issue number3
DOIs
StatePublished - Sep 2006
Externally publishedYes

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