Building on the Shanken (1992) estimator, we develop a new methodology for estimating and testing beta-pricing models when a large number of assets N is available but the number of time-series observations is small. We show empirically that our large N framework can change substantially common...

Since Black, Jensen, and Scholes (1972) and Fama and MacBeth (1973), the two-pass cross-sectional regression (CSR) methodology has become the most popular tool for estimating and testing beta asset pricing models. In this paper, we focus on the case in which simple regression betas are used as...