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Title: GMM and present value test of the C-CAPM under transactions costs: Evidence from the UK stock market
Authors: Gregoriou, A
Ioannidis, C
Keywords: Asset Pricing, Bid-Ask spreads, GMM, VAR.
Issue Date: 2003
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 03-01
Abstract: In this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. Two econometric models are used; first, Fisher’s (1994) asset pricing model is estimated by GMM, and secondly, the VAR approach proposed by Campbell and Shiller is extended to include the bid-ask spread. Overall the statistical tests are unable to reject the bid-ask spread as an independent explanatory variable in the C-CAPM. This leads to the conclusion that transactions costs should be included in asset pricing models.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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