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Fundamentals, Factor Structure, and Multibeta Models in Large Asset Markets

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  • John, Kose
  • Reisman, Haim

Abstract

The paper provides sufficient conditions under which a nonrandom economic variable specific to some asset (the dependent variable) can be represented as a linear combination of the betas of some random characteristics of the asset (the independent variables) with some economy-wide factors. This generalizes Ross' APT that proves the above in the case where the dependent variables are expected returns and the independent variables are returns. This generalization will provide a theoretical basis for many existing multibeta relationships beyond the setting of asset pricing models and, thus, motivate their wider use in empirical and theoretical research.

Suggested Citation

  • John, Kose & Reisman, Haim, 1991. "Fundamentals, Factor Structure, and Multibeta Models in Large Asset Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(1), pages 1-10, March.
    • Handle: RePEc:cup:jfinqa:v:26:y:1991:i:01:p:1-10_00
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