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Common factors in the arbitrage pricing model in two Scandinavian countries

Author

Listed:
  • Yli-Olli, P
  • Virtanen, I
  • Martikainen, T

Abstract

The purpose of this paper is to test the Arbitrage Pricing Theory (APT) using monthly data for Finnish and Swedish stock returns during the 1977-1986 period. The first stage involves estimating the systematic risk components for each asset using factor analysis. The second stage involves testing if the number and structure of factors which influence the security returns remain unchanged across various time periods and across different samples in the two Scandinavian countries. For this purpose, a new method called transformation analysis is introduced. Empirical evidence indicates that two or three common factors in these two neighbouring countries can be found.

Suggested Citation

  • Yli-Olli, P & Virtanen, I & Martikainen, T, 1990. "Common factors in the arbitrage pricing model in two Scandinavian countries," Omega, Elsevier, vol. 18(6), pages 615-624.
    • Handle: RePEc:eee:jomega:v:18:y:1990:i:6:p:615-624
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    Citations

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    Cited by:

    1. Oyetayo Oluwatosin J & Adeyeye Patrick Olufemi, 2017. "A Robust Application of the Arbitrage Pricing Theory: Evidence from Nigeria," Journal of Economics and Behavioral Studies, AMH International, vol. 9(1), pages 141-151.
    2. Javed Iqbal & Aziz Haider, 2005. "Arbitrage Pricing Theory: Evidence From An Emerging Stock Market," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 10(1), pages 123-139, Jan-Jun.
    3. Teppo Martikainen, 1991. "The impact of infrequent trading on betas based on daily, weekly and monthly return intervals : empirical evidence with Finnish data," Finnish Economic Papers, Finnish Economic Association, vol. 4(1), pages 52-64, Spring.

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