Testing multi-beta asset pricing models

Raja Velu, Guofu Zhou

Research output: Contribution to journalArticlepeer-review

15 Scopus citations


This paper presents a complete solution to the estimation and testing of multi-beta models by providing a small sample likelihood ratio test when the usual normality assumption is imposed and an almost analytical GMM test when the normality assumption is relaxed. Using 10 size portfolios from January 1926 to December 1994, we reject the joint efficiency of the CRSP value-weighted and equal-weighted indices. We also apply the tests to analyze a new version of Fama and French's [Fama, E.F., French, K.R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics. 33, 3-56.] three-factor model in addition to two standard ones, and find that the new version performs the best.

Original languageEnglish (US)
Pages (from-to)219-241
Number of pages23
JournalJournal of Empirical Finance
Issue number3
StatePublished - Sep 1999


  • APT
  • Asset pricing
  • C11
  • C31
  • Factor model
  • G11
  • G12
  • Multi-beta
  • Small sample test

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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