Connor, Gregory (1988) Risk and Return in an Equilibrium APT: Application of a New Test Methodology. Journal of Financial Economics, 21. pp. 255-289. ISSN 0304-405X

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Abstract

In this paper we estimate and test the restrictions implied by an equilibrium version of Ross’s arbitrage pricing theory (APT). We estimate the return factors using the asymptotic principal components technique first suggested by Chamberlain ar& Rothschild (1983) and extended by Concur and Korajczyk (1986). We test tie cross-sectional restrictions imposed by the APT with a variety of multivariate procedures. Section 2 describes the APT specification that we test. We use both the standard, s&atic version of the APT and an intertemporal version developed in Connor and Korajczyk (1987). In this second version there is one factor that has a unit beta for every security. The static version does not impose this unit-beta restriction.

Item Type:	Article
Keywords:	Risk; Equilibrium APT; Application; New Test Methodology;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	8438
Depositing User:	Gregory Connor
Date Deposited:	12 Jul 2017 08:51
Journal or Publication Title:	Journal of Financial Economics
Publisher:	Elsevier
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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