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Predicting Stock Returns in the Capital Asset Pricing Model Using Quantile Regression and Belief Functions

Author

Listed:
  • K Autchariyapanitkul

    (CMU - Chiang Mai University)

  • S Chanaim

    (CMU - Chiang Mai University)

  • S Sriboonchitta

    (CMU - Chiang Mai University)

  • T Denoeux

    (Heudiasyc - Heuristique et Diagnostic des Systèmes Complexes [Compiègne] - UTC - Université de Technologie de Compiègne - CNRS - Centre National de la Recherche Scientifique, Labex MS2T - Laboratoire d'Excellence "Maîtrise des Systèmes de Systèmes Technologiques" - UTC - Université de Technologie de Compiègne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider an inference method for prediction based on belief functions in quantile regression with an asymmetric Laplace distribution. We apply this method to the capital asset pricing model to estimate the beta coefficient and measure volatility under various market conditions at given quantiles. Likelihood-based belief functions are constructed from historical data of the securities in the S&P500 market. The results give us evidence on the systematic risk, in the form of a consonant belief function specified from the asymmetric Laplace distribution likelihood function given recorded data. Finally, we use the method to forecast the return of an individual stock.

Suggested Citation

  • K Autchariyapanitkul & S Chanaim & S Sriboonchitta & T Denoeux, 2014. "Predicting Stock Returns in the Capital Asset Pricing Model Using Quantile Regression and Belief Functions," Post-Print hal-01127790, HAL.
    • Handle: RePEc:hal:journl:hal-01127790
    DOI: 10.1007/978-3-319-11191-9_24
    Note: View the original document on HAL open archive server: https://hal.science/hal-01127790
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    References listed on IDEAS

    as
    1. Linden, Mikael, 2001. "A Model for Stock Return Distribution," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 159-169, April.
    2. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
    3. Michelle L. Barnes & Anthony W. Hughes, 2002. "A quantile regression analysis of the cross section of stock market returns," Working Papers 02-2, Federal Reserve Bank of Boston.
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    More about this item

    Keywords

    Quantile re-gression; Financial data; Likelihood-based belief functions; Dempster-Shafer Theory; Asymmetric Laplace distribution; Capital Asset Pricing;
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