Abstract
An investment experiment in which a real monetary profit or loss can occur is designed to test the Capital Asset Pricing Model (CAPM) and the Generalized CAPM (segmented market model) with ex-ante parameters. Risk and return are found to be strongly associated. While in most cases the Generalized CAPM beta provides the best results, the CAPM beta (and even the individual asset's variance, being a good proxy to the Generalized CAPM beta) reveals a strong positive association with mean returns. I conclude that the risk-return equilibrium model is not dead; it is alive and doing better than previous empirical studies have revealed.
Original language | English |
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Pages (from-to) | 119-149 |
Number of pages | 31 |
Journal | International Economic Review |
Volume | 38 |
Issue number | 1 |
DOIs | |
State | Published - Feb 1997 |