Table 5.16: Estimation results CAPM for best out-of-sample testing procedure. Coefficient estimates of the Sharpe-Lintner CAPM: rti-rtf=α + β (rtLocal-rtf) + εt. That is, the return in US Dollars of the best recursive optimizing and testing procedure, when selection in the optimizing period is done by the mean return criterion (Panel A) or by the Sharpe ratio criterion (Panel B), in excess of the US risk-free interest rate is regressed against a constant and the return of the local stock market index in US Dollars in excess of the US risk-free interest rate. Estimation results for the 0 and 0.50% costs per trade cases are shown. a, b, c indicates that the corresponding coefficient is, in the case of α, significantly different from zero, or in the case of β, significantly different from one, at the 1, 5, 10% significance level. Estimation is done with Newey-West (1987) heteroskedasticity and autocorrelation consistent (HAC) standard errors.

  Panel A   Panel B
selection criterion Mean return   Sharpe ratio
costs per trade 0% 0.50%   0% 0.50%
Data set α β α β   α β α β
World MSCI 0.001241a 0.849c -2.02E-05 0.969   0.001129a 0.802b 6.60E-05 0.711a
Argentina Merval 0.001469a 0.771a 0.000367 0.784b   0.001075b 0.614a 0.000638 0.757a
Brazil Bovespa 0.001412b 0.735a 0.000748 0.750a   0.001273b 0.615a 0.000561 0.594a
Canada TSX Composite 0.001016a 0.942 0.000127 1.028   0.000752a 0.777a 0.000159 0.809a
Chile IPSA 0.002085a 0.833b 0.001028a 0.800b   0.001870a 0.791a 0.001057a 0.707a
Mexico IPC 0.002000a 0.949 0.001054c 0.871   0.002285a 0.904 0.000454 0.994
Peru Lima General 0.001995a 0.911 0.001347a 0.923   0.001916a 0.919 0.001045a 0.868c
US S&P500 0.000144 0.902 -0.000324b 1.03   0.000213c 0.838 -0.00012 0.87
US DJIA 0.000202 0.851 -0.0001 0.774c   0.000114 0.693a -0.0002 0.847
US Nasdaq100 0.000465c 1.135c -0.000476c 1.154b   0.000653a 0.712a -0.00012 0.942
US NYSE Composite 0.000388a 0.783b -0.00015 0.918   0.000406a 0.734a -0.0002 0.753b
US Russel2000 0.001361a 0.939 0.000129 0.935   0.001155a 0.689a 0.000247 0.744a
US Wilshire5000 0.000495a 0.771a -0.000325b 1.031   0.000525a 0.715a -0.000284b 0.823b
Venezuela Industrial 0.002564a 1.075 0.000791 0.702b   0.002230a 0.925 0.000989b 1.093
Australia ASX All Ordinaries 0.000547a 1.027 0.000185 1.107c   0.000573a 0.865b 0.000206 0.905
China Shanghai Composite 0.001014b 0.735a 0.000304 0.983   0.001125a 0.684a 0.000896b 0.686a
Hong Kong Hang Seng 0.001162a 0.842b 0.00023 0.764b   0.001067a 0.702a 0.00013 0.653a
India BSE30 0.001566a 0.808a 0.000459 0.830a   0.001368a 0.777a 0.000462 1.159b
Indonesia Jakarta Composite 0.003274a 0.873 0.002154a 0.921   0.002661a 0.825b 0.001540a 0.791b
Japan Nikkei225 0.000134 0.774a -0.00024 0.782a   0.000155 0.763a -6.91E-05 0.894c
Malaysia KLSE Composite 0.002191a 0.952 0.000950a 0.947   0.001708a 0.871 0.000603b 0.846
New Zealand NZSE30 0.000357c 0.872a -7.91E-05 0.932   0.000548a 0.710a -0.00019 0.883c
Pakistan Karachi100 0.001712a 0.929 0.000809b 0.661a   0.001423a 0.888c 0.000763c 1.058
Philippines PSE Composite 0.002450a 0.912c 0.001467a 0.942   0.002065a 0.860b 0.000944a 0.799a
Singapore Straits Times 0.001476a 0.906 0.000398c 0.868c   0.001138a 0.785a 0.000269 0.775a
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