Realized Beta and the Conditional CAPM: A Time-Series
Test When Risk Premia Are Time-Varying
Anisha Ghosh* (University of London)
This paper provides a nonparametric test of the conditional CAPM focusing
on a nonparametric measure of the stocks' market beta called realized
beta that is easily computed from high frequency intra-period returns.
This approach to testing the conditional CAPM efficiently exploits the
information in high frequency intra-period returns. Second, this approach
does not require the econometrician to know the 'right' state variables,
i.e., it does not require any conditioning information. Third, the approach
allows us to explicitly incorporate the measurement error in the estimated
betas in the inference problem using the distributional results in Barndorff-Nielsen
and Shephard (2004).