Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Effect of Long Term Dependence on Risk-Return Models of Common Stocks

The Effect of Long Term Dependence on Risk-Return Models of Common Stocks In a previous paper the authors have shown that common stock returns are characterized by a phenomenon called long term dependence. The present paper discusses the implications of the presence of long term dependence for existing risk-return models in finance. Specifically, it is shown that (1) risk rankings of stocks or portfolios tend to vary with the differencing interval chosen to measure security returns, (2) efficient portfolios vary with the differencing interval selected, and (3) the unrealistic, homogeneous time horizon assumption of the capital asset pricing model must be retained in order for the model to hold. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Operations Research INFORMS

The Effect of Long Term Dependence on Risk-Return Models of Common Stocks

Operations Research , Volume 27 (5): 8 – Oct 1, 1979
8 pages

Loading next page...
 
/lp/informs/the-effect-of-long-term-dependence-on-risk-return-models-of-common-6z5THsDezC

References

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0030-364X
eISSN
1526-5463
DOI
10.1287/opre.27.5.944
Publisher site
See Article on Publisher Site

Abstract

In a previous paper the authors have shown that common stock returns are characterized by a phenomenon called long term dependence. The present paper discusses the implications of the presence of long term dependence for existing risk-return models in finance. Specifically, it is shown that (1) risk rankings of stocks or portfolios tend to vary with the differencing interval chosen to measure security returns, (2) efficient portfolios vary with the differencing interval selected, and (3) the unrealistic, homogeneous time horizon assumption of the capital asset pricing model must be retained in order for the model to hold.

Journal

Operations ResearchINFORMS

Published: Oct 1, 1979

There are no references for this article.