Cross-section without factors: a string model for expected returns (Q6592278)

The paper is a generalization of the classical CAPM model. The authors consider a market with a continuum of assets, indexed by the unit interval (0,1). Furthermore, they assume that the standard deviations and correlations of the returns of the assets are continuous functions of a certain stochastic state process and the indices of the assets. The goal is to determine the expected returns basing on the correlation risk premium. As an illustration of possible applications of the model, the study of all constituents of the S\&P500 index is provided.