In accordance with the empirical regularity of time-varying betas, following the work of Bai and Perron (1998, 2003), we estimate and test for the Sharpe-Lintner CAPM by allowing for structural change(s) in betas. Empirical applications using BM- and size-sorted quintile portfolios suggest the following interesting results. Firstly, there exists at least on break for all the portfolios under consideration. Secondly, the estimated break dates are quite similar for some of the portfolios, indicating the possible existence of a common break using multivariate time series. Finally, we with the data in some regimes but may appear to be inconsistent with the data in some other regimes. This particularly appealing feature has been completely ruled out under the conventional single-equation framework.
2003兩岸財經學術研討會論文集=Proceedings of 2003 Straits Conference on Economics and Business，28頁