New study reveals game-changing approach to evaluating asset pricing models!
The article presents a new method to evaluate asset pricing models. By using a single-step estimator called continuously updated GMM, researchers found that it gives consistent results for various factors and types of returns. This means that regardless of the factors being traded or the type of returns used, the values for prices of risk, pricing errors, Jensen's alphas, and over identifying restrictions tests remain the same. The study demonstrates this using currency returns data.