Date of this Version
The Journal of Finance
The methods of Gibbons and Ferson (1985) are extended, relaxing the assumption that expected returns are linear functions of predetermined instruments. A model of conditional mean-variance spanning generalizes Huberman and Kandel (1987). The empirical results indicate that more than a single risk premium is needed to model expected stock and bond returns, but the number of common factors in the expected returns is small. However, when size-based common stock portfolios proxy for the risk factors, we reject the hypothesis that four of them describe the conditional expected returns of the other assets.
This is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/j.1540-6261.1993.tb04704.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Ferson, W. E., Foerster, S. R., & Keim, D. B. (1993). General Tests of Latent Variable Models and Mean-Variance Spanning. The Journal of Finance, 48 (1), 131-156. http://dx.doi.org/10.1111/j.1540-6261.1993.tb04704.x
Date Posted: 27 November 2017
This document has been peer reviewed.