CONDITIONAL PRICING MODEL WITH HETEROSCEDASTICITY: EVALUATION OF BRAZILIAN FUNDS

LEANDRO SANTOS DA COSTA, FRANCES FISCHBERG BLANK, FERNANDO LUIZ CYRINO OLIVEIRA, CRISTIAN ENRIQUE MUÑOZ VILLALOBOS
2019 RAE: Revista de Administração de Empresas  
Empirical studies have revealed that the conditional Capital Asset Pricing Model (CAPM) has a higher explanatory power than its unconditional version, particularly for the model in state-space form where the beta is estimated using Kalman filter. Most empirical analyses are based on stock portfolios to explain financial anomalies, but only a few studies proposed improving investment fund performance. The main contribution of this study is the assessment of Brazilian investment funds through
more » ... t funds through traditional measures estimated from the CAPM model in state-space form with heteroscedastic and homoscedastic errors compared to alternative models, such as the unconditional CAPM and a four-factor model. Using a sample of stock funds from May 2005-April 2015, the results indicate that the conditional CAPM model produces better results than the alternative models, providing better performance evaluation practices for funds in both stock-picking and market-timing ability.
doi:10.1590/s0034-759020190402 fatcat:zc4y2uy4t5dnzbbuaulhnbllci