This paper develops and implements an exact finite-sample test of asset pricing models with time varying risk premia using posterior probabilities. The strength of our approach is that it allows multiple conditional asset pricing specifications, both nested and non-nested, to be tested and...

This paper develops and implements an exact finite-sample test of asset pricing models with time varying risk premia using posterior probabilities. The strength of our approach is that it allows multiple conditional asset pricing speci fications, both nested and non-nested, to be tested and...

This paper exploits the intuition of the ICAPM to propose a measure that formally compares the empirical performance of competing asset pricing models in the presence of short selling constraints. In a multifactor context, portfolios are said to be efficient if they yield the highest expected...