The authors characterize the sets of mimicking positions whose returns can serve in place of factors in an exact K-factor arbitrage pricing relation for a set of N assets. All of the sets are K-dimensional nonsingular linear transformations of each other. The authors interpret three examples of...

Tests of asset-pricing models are developed that allow expected risk premiums and market betas to vary over time. These tests exploit the relation between expected excess returns and current market values. Using weekly data for 1963-82 on ten common stock portfolios formed according to equity...

Sample evidence about the predictability of monthly stock returns is considered from the perspective of a risk-averse Bayesian investor who must allocate funds between stocks and cash. The investor uses the sample evidence to update prior beliefs about the parameters in a regression of stock...

The capital asset pricing model implies that the market portfolio is efficient and expected returns are linearly related to betas. Many do not view these implications as separate, since either implies the other, but the authors demonstrate that either can hold nearly perfectly while the other...

The authors develop a method of measuring ex ante real interest rates using prices of index and nominal bonds. Employing this method and newly available data, they directly test the Fisher hypothesis that the real rate of interest is independent of inflation expectations. The authors find a...

The authors propose a likelihood- ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another s et of N assets. They study the relation between this hypothesis, exac t arbitrage pricing, and mutual-fund separation. The...