A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction
We estimate the CAPM model on European stock market data, allowing for asymmetric and fat-tailed return distributions using independent and identically asymmetric power distributed (IIAPD) innovations. The results indicate that the generalized CAPM with IIAPD errors has desirable properties. It is s...
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sg-ntu-dr.10356-1042402020-03-07T13:00:26Z A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction Bao, Te Diks, Cees Li, Hao School of Social Sciences DRNTU::Social sciences::Economic development CAPM Non-Gaussian Distribution We estimate the CAPM model on European stock market data, allowing for asymmetric and fat-tailed return distributions using independent and identically asymmetric power distributed (IIAPD) innovations. The results indicate that the generalized CAPM with IIAPD errors has desirable properties. It is substantially less likely to be rejected than the traditional CAPM with normally distributed errors and, moreover, backtests show that portfolios constructed using IIAPD errors outperform the portfolio constructed with normally distributed errors in terms of commonly-used performance measures. MOE (Min. of Education, S’pore) Accepted version 2019-06-07T08:34:37Z 2019-12-06T21:28:52Z 2019-06-07T08:34:37Z 2019-12-06T21:28:52Z 2017 Journal Article Bao, T., Diks, C., & Li, H. (2018). A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction. Economic Modelling, 68, 611-621. doi:10.1016/j.econmod.2017.03.035 0264-9993 https://hdl.handle.net/10356/104240 http://hdl.handle.net/10220/48608 10.1016/j.econmod.2017.03.035 en Economic Modelling © 2017 Elsevier B.V. All rights reserved. This paper was published in Economic Modelling and is made available with permission of Elsevier B.V. 44 p. application/pdf |
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DRNTU::Social sciences::Economic development CAPM Non-Gaussian Distribution Bao, Te Diks, Cees Li, Hao A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
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We estimate the CAPM model on European stock market data, allowing for asymmetric and fat-tailed return distributions using independent and identically asymmetric power distributed (IIAPD) innovations. The results indicate that the generalized CAPM with IIAPD errors has desirable properties. It is substantially less likely to be rejected than the traditional CAPM with normally distributed errors and, moreover, backtests show that portfolios constructed using IIAPD errors outperform the portfolio constructed with normally distributed errors in terms of commonly-used performance measures. |
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School of Social Sciences |
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School of Social Sciences Bao, Te Diks, Cees Li, Hao |
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Article |
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Bao, Te Diks, Cees Li, Hao |
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Bao, Te |
title |
A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
title_short |
A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
title_full |
A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
title_fullStr |
A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
title_full_unstemmed |
A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction |
title_sort |
generalized capm model with asymmetric power distributed errors with an application to portfolio construction |
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2019 |
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https://hdl.handle.net/10356/104240 http://hdl.handle.net/10220/48608 |
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1681038708128612352 |