CAPM model extensions

摘要

In this work a stochastic formulation of the CAPM (Capital Market Pricing Model) called CAPM-VAR, is proposed. In the proposed formulation the coefficients α and β of the model follow a first order vector autoregressive process, which parameters are estimated with the Kalman Filter. The hyper-parameters of the model are estimated using the EM algorithm. The model is tested using two series of daily retrus from the Brazilian financial market.