In accordance with the empirical regularity of time-varying betas we estimate and test for the Sharpe-Lintner CAPM by allowing for structural change(s) in betas. Empirical applications using BM- and size-sorted decile portfolios suggest the following interesting results. Firstly, there exists at...

A tradeoff between forecast accuracy and the length of an estimation period always exists in forecasting. Longer estimation periods are argued to be less efficient, however, using the forecast encompassing and accuracy test, this study discusses the importance of considering the overall...