GMM and present value tests of the C-CAPM under Transactions Costs: Evidence from the UK stock market

Gregoriou, Andros and Ioannidis, C. 2003. GMM and present value tests of the C-CAPM under Transactions Costs: Evidence from the UK stock market. Empirical Economics 32 (1) , pp. 19-39. 10.1007/s00181-006-0070-9

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Abstract

In this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. Two econometric models are used; first, Fisher’s (1994) asset pricing model is estimated by GMM, and secondly, the VAR approach proposed by Campbell and Shiller is extended to include the bid-ask spread. Overall the statistical tests are unable to reject the bid-ask spread as an independent explanatory variable in the C-CAPM. This leads to the conclusion that transactions costs should be included in asset pricing models.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HG Finance
Publisher:	Springer Verlag
ISSN:	0377-7332
Last Modified:	19 Mar 2016 22:58
URI:	https://orca.cardiff.ac.uk/id/eprint/33609

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