Table 5.7: Estimation results CAPM. Coefficient estimates of the Sharpe-Lintner CAPM: rti-rtf=α + β (rtLocal-rtf) + εt. That is, the return in US Dollars of the best recursive optimizing and testing procedure, when selection in the optimizing period is done by the mean return criterion (Panel A) or by the Sharpe ratio criterion (Panel B), in excess of the US risk-free interest rate is regressed against a constant and the return of the local main stock market index in US Dollars in excess of the US risk-free interest rate. Estimation results for the 0 and 0.10% costs per trade cases are shown. a, b, c indicates that the corresponding coefficient is, in the case of α, significantly different from zero, or in the case of β, significantly different from one, at the 1, 5, 10% significance level. Estimation is done with Newey-West (1987) heteroskedasticity and autocorrelation consistent (HAC) standard errors.
Panel A Panel B selection criterion Mean return Sharpe ratio costs per trade 0% 0.50% 0% 0.50% Data set α β α β α β α β World MSCI 0.001342a 0.850c 0.000223b 0.913 0.001342a 0.850c 0.000188b 0.506a Argentina Merval 0.001297a 0.509a 0.001148b 0.508a 0.001297a 0.509a 0.001148b 0.508a Brazil Bovespa 0.001558a 0.749a 0.001163b 0.546a 0.001386a 0.547a 0.001163b 0.546a Canada TSX Composite 0.001144a 0.878 0.000193 1.087 0.001144a 0.878 0.000157 0.322a Chile IPSA 0.002290a 0.878c 0.000715b 0.640a 0.002290a 0.878c 0.000715b 0.640a Mexico IPC 0.002716a 0.849b 0.001140b 0.714a 0.002716a 0.849b 0.001140b 0.714a Peru Lima General 0.002781a 0.973 0.001146a 0.913 0.002781a 0.973 0.001101a 0.853c US S&P500 0.000454a 0.875 0.000199c 0.975 0.000454a 0.875 0.000202c 0.662a US DJIA 0.000315b 0.94 0.000201c 0.616a 0.000316b 0.859 0.000201c 0.616a US Nasdaq100 0.000930a 0.860a 0.000407b 0.627a 0.000930a 0.860a 0.000407b 0.627a US NYSE Composite 0.000567a 0.876 0.000169 0.770b 0.000567a 0.876 0.000169 0.770b US Russel2000 0.001471a 0.873a 0.000386b 0.726a 0.001471a 0.873a 0.000380b 0.609a US Wilshire5000 0.000752a 0.849c 0.000111 1.206a 0.000753a 0.821b 0.000161c 0.721a Venezuela Industrial 0.003238a 0.691 0.000598 0.801 0.003238a 0.691 0.000588 0.778 Australia ASX All Ordinaries 0.000861a 0.832 0.000378c 0.87 0.000861a 0.832 0.000378c 0.87 China Shanghai Composite 0.001238a 1.127 0.000565 0.932 0.001238a 1.127 0.000565 0.932 Hong Kong Hang Seng 0.001691a 0.655a 0.000412 1.126 0.001691a 0.655a 0.000428b 0.641a India BSE30 0.002126a 0.98 0.000641c 0.891 0.002126a 0.98 0.000576c 0.715a Indonesia Jakarta Composite 0.003589a 0.882 0.001850a 0.808b 0.003589a 0.882 0.001384a 0.392a Japan Nikkei225 0.000592b 0.793a 0.000295c 0.397a 0.000592b 0.793a 0.000134 0.130a Malaysia KLSE Composite 0.002452a 0.925 0.001033a 0.651a 0.002452a 0.925 0.000997a 0.564a New Zealand NZSE30 0.000542a 0.855b 0.000367c 0.886 0.000542a 0.855b 0.000275 0.414a Pakistan Karachi100 0.001950a 0.925 0.001005a 0.791b 0.001950a 0.925 0.001005a 0.791b Philippines PSE Composite 0.002842a 0.958 0.001052a 0.697a 0.002842a 0.958 0.001052a 0.697a Singapore Straits Times 0.001990a 0.844c 0.000648a 0.633a 0.001990a 0.844c 0.000648a 0.633a
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