Asset pricing models with conditional betas and alphas: The effects of data snooping and spurious regression

Wayne E. Ferson, Sergei Sarkissian, Timothy Simin

Research output: Contribution to journalArticle

36 Scopus citations

Abstract

This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become biased. Previous studies overstate the significance of time-varying alphas.

Original languageEnglish (US)
Pages (from-to)331-354
Number of pages24
JournalJournal of Financial and Quantitative Analysis
Volume43
Issue number2
DOIs
StatePublished - Jun 2008

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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