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Tests of international asset pricing model with and without a riskless asset

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  • Pin-Huang Chou
  • Mei-Chen Lin

Abstract

This paper investigates the unconditional mean-variance efficiency of the Morgan Stanley Capital International (MSCI) world index in the context of the Sharpe- Lintner CAPM where there exists a universal riskless asset and the Black's zero-beta CAPM in the absence of a riskless asset. Using data from 16 OECD countries and Hong Kong over the period from 1980 to 1997, various tests under alternative distributional specifications are performed. The results show that overall the mean-variance efficiency of the MSCI world index cannot be rejected, regardless of the existence of the riskless asset.

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  • Pin-Huang Chou & Mei-Chen Lin, 2002. "Tests of international asset pricing model with and without a riskless asset," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 873-883.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:12:p:873-883
    DOI: 10.1080/09603100110053308
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    Cited by:

    1. Javed Iqbal & Robert Brooks & Don U.A. Galagedera, 2008. "Multivariate tests of asset pricing: Simulation evidence from an emerging market," Monash Econometrics and Business Statistics Working Papers 2/08, Monash University, Department of Econometrics and Business Statistics.
    2. Yuenan Wang & Amalia Di Iorio, 2007. "The cross-sectional relationship between stock returns and domestic and global factors in the Chinese A-share market," Review of Quantitative Finance and Accounting, Springer, vol. 29(2), pages 181-203, August.
    3. Yunieta Nainggolan & Janice How & Peter Verhoeven, 2016. "Ethical Screening and Financial Performance: The Case of Islamic Equity Funds," Journal of Business Ethics, Springer, vol. 137(1), pages 83-99, August.
    4. David Morelli, 2009. "Capital market integration: evidence from the G7 countries," Applied Financial Economics, Taylor & Francis Journals, vol. 19(13), pages 1043-1057.

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