This paper provides a stringent proof for the general test of latent variable model with time-varying risk premium developed by Ferson and Foerster(1993) and conducts a test by selecting “the size portfolio” as samp...
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This paper provides a stringent proof for the general test of latent variable model with time-varying risk premium developed by Ferson and Foerster(1993) and conducts a test by selecting “the size portfolio” as sample in Chinese stock *** Block-Bootstrap method is also adopted to study the finite sample properties of *** result reveals that the Block-Bootstrap simulation of GMM is robust and P-value based on asymptotic distribution tends to be *** empirical result shows that the China’s stock market can not reject the “ 1 latent variable model”.The conclusion of this paper manifests the essence of risk and return in the China’s stock market and has great significance to the policy-making.
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