Risk and return: An experimental analysis

Haim Levy

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

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 languageEnglish
Pages (from-to)119-149
Number of pages31
JournalInternational Economic Review
Volume38
Issue number1
DOIs
StatePublished - Feb 1997

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