Evaluation of linear asset pricing models by implied portfolio performance

摘要

We present a theoretical perspective that motivates the use of the Generalized Least Squares R-Square, prominently advocated by Lewellen et al. [Lewellen, J., Nagel, S., Shanken, J., forthcoming. A skeptical appraisal of asset-pricing tests. Journal of Financial Economics], as an evaluation measure for multivariate linear asset pricing models. Adapting results from Shanken [Shanken, J., 1985. Multivariate tests of the zero-beta CAPM. Journal of Financial Economics 14, 327-348] and Kandel and Stambaugh [Kandel, S., Stambaugh, R.F., 1995. Portfolio inefficiency and the cross-section of expected returns, journal of Finance 50, 157-184], we provide various interpretations and a graphical account in mean-variance space of this measure, facilitating a better understanding of its properties. We furthermore relate it to another leading evaluation metric, the HJ-distance of Hansen andJagannathan [Hansen, L.P., Jagannathan, R., 1997. Assessing specification errors in stochastic discount factor models. Journal of Finance 52, 557-590], Additionally, we present a comparison between these evaluation measures using mean-variance mathematics in risk-return space, and we provide a simple formula for calculating both model evaluation measures that involves only the parameters of the mean-variance asset and factor frontiers.