In this paper we develop alternative ways to compare asset pricing models when it is understood that their implied stochastic discount factors do not price all portfolios correctly. Unlike comparisons based on chi-squared statistics associated with null hypotheses that models are correct, our...

We provide a brief review of the techniques that are based on the Generalized Method of Moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We...

Most empirical studies of the static CAPM assume that betas remain constant over time and that the return on the value-weighted portfolio of all stocks is a proxy for the return on aggregate wealth. The general consensus is that the static CAPM is unable to explain satisfactorily the...