2012/11/26 by ELENA ASPAROUHOVA, Elena Asparouhova, HENDRIK BESSEMBINDER +3 · 83 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Mathematics · #Capital asset pricing model #Computer science #Econometrics #Economics #Financial Markets and Investment Strategies #Financial Reporting and Valuation Research #Financial economics #Inference #Mathematics #Monetary Policy and Economic Impact #Standard deviation #Statistics
paper · doi:10.1111/jofi.12010
published in The Journal of Finance 68(2), 665-714 (Wiley)
openalex publication_date 2012/11/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/24
ABSTRACT Temporary deviations of trade prices from fundamental values impart bias to estimates of mean returns to individual securities, to differences in mean returns across portfolios, and to parameters estimated in return regressions. We consider a number of corrections, and show them to be effective under reasonable assumptions. In an application to the Center for Research in Security Prices monthly returns, the corrections indicate significant biases in uncorrected return premium estimates associated with an array of firm characteristics. The bias can be large in economic terms, for example, equal to 50% or more of the corrected estimate for firm size and share price.