Encyclopedia of Finance

2013 Edition
| Editors: Cheng-Few Lee, Alice C. Lee

Time-Series and Cross-Sectional Tests of Asset Pricing Models

Reference work entry
DOI: https://doi.org/10.1007/978-1-4614-5360-4_63

Abstract

This article reviews the methodologies of testing asset pricing models which are dominantly used in the literature; time-series regression tests and cross-sectional regression tests. We provide some explanations for the test procedure of time-series regression tests and cross-sectional regression tests. We discuss individual t-test, the joint F-test by Gibbons, Ross, and Shanken (Econometrica 57:1121–1152, 1989) and tests based on the generalized method of moments estimation. We also explain the two-pass test methodology and discuss the errors-in-variables problem which occurs inevitably in the two-pass methodology.

Keywords

Asset pricing models Cross-sectional tests Time-series tests 
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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Korea University Business SchoolSeoulSouth Korea