Some Empirical Tests of the Theory of Arbitrage Pricing

Some Empirical Tests of the Theory of Arbitrage Pricing ABSTRACT We estimate the parameters of Ross's Arbitrage Pricing Theory (APT). Using daily return data during the 1963–78 period, we compare the evidence on the APT and the Capital Asset Pricing Model (CAPM) as implemented by market indices and find that the APT performs well. The theory is further supported in that estimated expected returns depend on estimated factor loadings, and variables such as own variance and firm size do not contribute additional explanatory power to that of the factor loadings. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Some Empirical Tests of the Theory of Arbitrage Pricing

The Journal of Finance, Volume 38 (5) – Dec 1, 1983

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Publisher
Wiley
Copyright
1983 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1983.tb03831.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT We estimate the parameters of Ross's Arbitrage Pricing Theory (APT). Using daily return data during the 1963–78 period, we compare the evidence on the APT and the Capital Asset Pricing Model (CAPM) as implemented by market indices and find that the APT performs well. The theory is further supported in that estimated expected returns depend on estimated factor loadings, and variables such as own variance and firm size do not contribute additional explanatory power to that of the factor loadings.

Journal

The Journal of FinanceWiley

Published: Dec 1, 1983

References

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