Cross-Sectional Returns and Fama-MacBeth Betas for S&P Indices

V. Reddy Dondeti, Jr. Carl B. McGowan

Abstract


In this paper, we use the Fama-MacBeth regression analysis methodology to determine if twenty indices for the twenty year time period from 1990 to 2009 provide a linear relationship between the index returns and index betas. The time-series of the betas of all the indices except that of Gold and Silver Index for monthly returns of one-year intervals are non-stationary. The betas in four of the five quintiles formed by sorting the indices in order of the highest to the lowest betas are found to be co-integrated. The results of the empirical tests on the gamma coefficients of the Fama-Macbeth regressions do not support the CAPM.


Full Text: PDF DOI: 10.5430/afr.v2n4p149

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Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online)

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