An Examination of Alternative Factor Models in UK Stock Returns

An Examination of Alternative Factor Models in UK Stock Returns This paper examines the mean-variance efficiency of a number offactor models in UK stock returns. The paper also explores, using theapproach of MacKinlay (1995), whether missing risk factors ornonrisk-based explanations best explain the pricing errors of thedifferent factor models. The evidence in the paper suggests that themean-variance efficiency of each factor model is rejected and missing riskfactors are unable to explain the pricing errors of any of the models.Some nonrisk-based explanations, which posit a wide spread in abnormalreturns, may be a more plausible source of explaining the pricing errorsof the factor models. Review of Quantitative Finance and Accounting Springer Journals

An Examination of Alternative Factor Models in UK Stock Returns

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Kluwer Academic Publishers
Copyright © 2001 by Kluwer Academic Publishers
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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