Nonnormalities and Tests of Asset Pricing Theories

Nonnormalities and Tests of Asset Pricing Theories ABSTRACT The robustness of the multivariate test of Gibbons, Ross, and Shanken (1986) to nonnormalities in the residual covariance matrix is examined. After considering the relative performance of various tests of normality, simulation techniques are used to determine the effects of nonnormalities on the multivariate test. It is found that, where the sample nonnormalities are severe, the size and/or power of the test can be seriously misstated. However, it is also shown that these extreme sample values may overestimate the population parameters. Hence, we conclude that the multivariate test is reasonably robust with respect to typical levels of nonnormality. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Nonnormalities and Tests of Asset Pricing Theories

Loading next page...
 
/lp/wiley/nonnormalities-and-tests-of-asset-pricing-theories-Y36z0LdTid
Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1989.tb02629.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The robustness of the multivariate test of Gibbons, Ross, and Shanken (1986) to nonnormalities in the residual covariance matrix is examined. After considering the relative performance of various tests of normality, simulation techniques are used to determine the effects of nonnormalities on the multivariate test. It is found that, where the sample nonnormalities are severe, the size and/or power of the test can be seriously misstated. However, it is also shown that these extreme sample values may overestimate the population parameters. Hence, we conclude that the multivariate test is reasonably robust with respect to typical levels of nonnormality.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1989

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off