Risk and Return in the Spanish Stock Market

Publication Date
Financial Markets Group Discussion Papers DP 212
Publication Authors

In this paper we use Spanish data to test the restrictions that a dynamic APT-type asset pricing model imposes on the risk-return relationship. For monthly returns on ten size-ranked portfolios and a value-weighted index, we find that those restrictions are rejected for different versions of the model over the period 1963-1992, as well as over two subsamples. The evidence for the conditional models suggests that the Spanish stock market is segmented, which probably reflects the fact that it is only deep for a few stocks.