Department of Finance
Pennsylvania State University
University Park, PA 16802
Institutional Affiliation: Pennsylvania State University
Information about this author at RePEc
NBER Working Papers and Publications
|October 2006||Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression|
with Wayne E. Ferson, Sergei Sarkissian: w12658
This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become baised. Previous studies overstate the significance of time-varying alphas.
Published: Ferson, Wayne E. & Sarkissian, Sergei & Simin, Timothy, 2008.
"Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 43(02), pages 331-353, June.
citation courtesy of
|September 2002||Spurious Regressions in Financial Economics?|
with Wayne E. Ferson, Sergei Sarkissian: w9143
Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The two effects reinforce each other, because more highly persistent series are more likely to be found significant in the search for predictor variables. Our simulations suggest that many of the regressions in the literature, based on individual predictor variables, may be spurious
Published: Ferson, Wayne, Timothy Simin, and Sergei Sarkissian. "Spurious regressions in Financial Economics?" Journal of Finance 58 (August 2003): 1393-1414. citation courtesy of