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Department of Applied Finance and Actuarial Studies

Seminar by Adam Srejber

Research Seminars - business and economics
  • Topic: Asset Pricing Using Market Cash Flow Risk and Discount Rate Risk - Does it Work?
  • Speaker: Adam Srejber - Macquarie University
  • Venue:
  • When: 4th May, 2012, (Fri)
  • Time:

Campbell and Vuolteenaho (2004) show that the returns on the Fama and French 25 size and value portfolios can be explained by their relative levels of `cash flow' and `discount rate' risk. In this article I further investigate the properties of this pricing model by conducting a number of robustness tests. I find evidence that the pricing properties of the Campbell and Vuolteenaho (2004) specification of the CAPM are driven by the relationship between the test portfolios used to test the model and the risk factors used within the pricing model. This evidence suggests that the pricing results of this model must be approached with caution as they are not easily interpretable. Secondly, I find that the lack of generalisability of the Campbell and Vuolteenaho (2004) model to an alternative testing methodology and out-of-sample cross-sectional and time series tests raises further questions of the pricing model's practical utility.

To view the full paper click -  Asset Pricing Using Market Cash Flow Risk and Discount Rate Risk - Does it Work?



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