how to understand intuitively the Inter-temporal CAPM model? what is the appropriate econometric model to empirical test the inter-temporal CAPM model?
Intertemporal merely means time-varying. I recommend these 2 articles: 1. Faff, Hillier and Hillier (2000) Time varying beta risk: An analysis of alternative modelling echniques in the Journal of Business Finance and Accounting, and Ghysels (1998) On stable factor structures in the pricing of risk: Do time-varying betas help or hurt? in the Journal of Finance.
I thinks the following links and articles can be useful
Merton, R. C. (1973). An intertemporal capital asset pricing model. Econometrica: Journal of the Econometric Society, 867-887.
Stehle, R. (1977). An empirical test of the alternative hypotheses of national and international pricing of risky assets. The Journal of Finance, 32(2), 493-502.
Jagannathan, R., & Wang, Z. (1996). The conditional CAPM and the cross‐section of expected returns. The Journal of finance, 51(1), 3-53.
CHEN, N. F. (1983). Some empirical tests of the theory of arbitrage pricing. The Journal of Finance, 38(5), 1393-1414.
Dempsey, M. (2013). The capital asset pricing model (CAPM): the history of a failed revolutionary idea in finance?. Abacus, 49(S1), 7-23.
Machado, O. P., Bortoluzzo, A. B., Martins, S. R., & Sanvicente, A. Z. (2013). Inter-temporal CAPM: An Empirical Test with Brazilian Market Data (CAPM Intertemporal: Um Teste Empírico Utilizando Dados Brasileiros). Revista Brasileira de Finanças, 11(2), 149.
You can take a look at Theorem 1 and its test (Statistical Mathematical Proof) on [email protected] | The Econometric Society
https://www.econometricsociety.org/users/earl-fitzpatrick-york-mallick-sir-asutosh-mukherjee-university-institute-chair-professor. I also relates dynamic CAP with corporate finance and learning.
Soumitra K. Mallick
for Soumitra K. Mallick, Nick Hamburger, Sandipan Mallick