The Conditional CAPM and the Cross-Section of Expected Returns

@article{Jagannathan1996TheCC,
  title={The Conditional CAPM and the Cross-Section of Expected Returns},
  author={R. Jagannathan and Zhenyu Wang},
  journal={Journal of Finance},
  year={1996},
  volume={51},
  pages={3-53}
}
Most empirical studies of the static CAPM assume that betas remain constant over time and that the return on the value-weighted portfolio of all stocks is a proxy for the return on aggregate wealth. The general consensus is that the static CAPM is unable to explain satisfactorily the cross-section of average returns on stocks. We assume that the CAPM holds in a conditional sense, i.e., betas and the market risk premium vary over time. We include the return on human capital when measuring the… Expand

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