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A best choice among asset pricing models? The Conditional Capital Asset Pricing Model in Australia

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  • Nick Durack
  • Robert B. Durand
  • Ross A. Maller

Abstract

We use Australian data to test the Conditional Capital Asset Pricing Model (Jagannathan and Wang, 1996). Our results are generally supportive: the model performs well compared with a number of competing asset pricing models. In contrast to the study by Jagannathan and Wang, however, we find that the inclusion of the market for human capital does not save the concept of the time‐independent market beta (it remains insignificant). We find support for the role of a small‐minus‐big factor in pricing the cross‐section of returns and find grounds to disagree with Jagannathan and Wang's argument that this factor proxies for misspecified market risk.

Suggested Citation

  • Nick Durack & Robert B. Durand & Ross A. Maller, 2004. "A best choice among asset pricing models? The Conditional Capital Asset Pricing Model in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 139-162, July.
    • Handle: RePEc:bla:acctfi:v:44:y:2004:i:2:p:139-162
    DOI: 10.1111/j.1467-629X.2004.00107.x
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    References listed on IDEAS

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