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Aspects of the Factor Structure Implicit in the Australian Industrial Equity Market: February 1958 to August 1977

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  • N. A. Sinclair

    (Monash University. This paper has benefited from the comments given by Ray Ball during the course of his supervision of the thesis from which the paper is drawn.)

Abstract

Several asset pricing models have been developed in the literature, all of which can be treated as special theoretical cases of the Arbitrage Pricing Theory (APT). This paper examines aspects of the factor structure implicit in securities' monthly return data. Part of the approach is directly analogous to an examination of market model beta stationarity. It is found that a single factor, typically identified as a market factor, is dominant and remains intertemporally stable. Ceteris paribus, the implicit factor structure is consistent with a one factor APT of which the mean-variance CAPM is a special case.

Suggested Citation

  • N. A. Sinclair, 1984. "Aspects of the Factor Structure Implicit in the Australian Industrial Equity Market: February 1958 to August 1977," Australian Journal of Management, Australian School of Business, vol. 9(1), pages 23-36, June.
    • Handle: RePEc:sae:ausman:v:9:y:1984:i:1:p:23-36
    DOI: 10.1177/031289628400900102
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    References listed on IDEAS

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    1. Meyers, Stephen L, 1973. "A Re-Examination of Market and Industry Factors in Stock Price Behavior," Journal of Finance, American Finance Association, vol. 28(3), pages 695-705, June.
    2. Donald E. Farrar, 1962. "The Investment Decision Under Uncertainty: Portfolio Selection," Journal of Finance, American Finance Association, vol. 17(4), pages 671-672, December.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
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    Cited by:

    1. Nick Durack & Robert B. Durand & Ross A. Maller, 2004. "A best choice among asset pricing models? The Conditional Capital Asset Pricing Model in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 139-162, July.
    2. Colin T. Bowers & Chris Heaton, 2013. "What does high-dimensional factor analysis tell us about risk factors in the Australian stock market?," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1395-1404, April.

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