Autoregressive multifactor APT model for U.S. Equity Markets
AbstractArbitrage Pricing Theory is a one period asset pricing model used to predict equity returns based on a multivariate linear regression. We choose three sets of factors – Market specific, firm specific, and an autoregressive return term to explain returns on twenty U.S. stocks, using monthly data over the period 2000-2005. Our findings indicate that, apart from the CAPM beta factor, at least five other factors are significant in determining time series and cross sectional variations in returns. The times series regression establishes factor loadings and the cross sectional regression gives the risk premiums associated with these factors.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23418.
Date of creation: 15 Apr 2010
Date of revision:
Equity Pricing; APT; Arbitrage pricing theory; Multifactor model; Security; Pricing; CAPM;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-CFN-2010-07-03 (Corporate Finance)
- NEP-FMK-2010-07-03 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shanken, Jay, 1987. "Multivariate proxies and asset pricing relations : Living with the Roll critique," Journal of Financial Economics, Elsevier, vol. 18(1), pages 91-110, March.
- Gur Huberman & Zhenyu Wang, 2005. "Arbitrage pricing theory," Staff Reports 216, Federal Reserve Bank of New York.
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