Capital Asset Pricing with a Stochastic Horizon
Speaker
Abstract
| Michael Brennan is a Professor of Finance at both UCLA Anderson and London Business School. His research interests include asset pricing, corporate finance, the pricing and role of derivative securities, market microstructure, and the role of information in capital markets. He has published extensively in all of these areas. |
| In this paper we present empirical tests of an extended version of the Capital Asset Pricing Model that replaces the single period horizon with a probability distribution over different horizons. Adopting a simple parameterization of the probability distribution of the length of the horizon, we estimate the parameters of the distribution as well as the parameters of the CAPM. We find that the extended model is not rejected, and that the estimated stock turnover rate rises from 82.8% in the period 1926-62 to 266.4% in the period 1963-2009. We also find that long horizon betas are determined by identifiable firm characteristics as well as by short horizon betas. |
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| Contact information: |
| Elvira Sojli |
| This event is an Erasmus Finance Seminar. The Erasmus Finance Seminar series brings prominent researchers in Finance from all over the world to Rotterdam. |
