IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v14y1979i01p59-76_00.html
   My bibliography  Save this article

The Implications of Recursiveness in Capital Markets–Theory and Empirical Tests

Author

Listed:
  • Singleton, J. Clay
  • Lauer, Joseph R.

Abstract

Much of the current work in the analysis of security returns has been directed towards improving the specification of the Sharpe diagonal capital market model [9]. Because the residuals from the market model for different securities are observed to be correlated, some factor or factors are assumed to be common to large groups of stocks exclusive of the economy-wide influences captured by the market index. King [6], for example, found industry effects to be a significant determinant of security returns. In recent articles in this journal and elsewhere Lee and Lloyd, hereafter (L&L) ([7] [8]) attempt to capture the interaction of firms within an industry. They propose a recursive capital market model, an approach which is attractive because it allows for interaction in the determination of stock prices without the complications of a more fully simultaneous equations model (Simkowitz and Logue [10]). However, the L&L application of the recursive system is not without problems in both theory and application.

Suggested Citation

  • Singleton, J. Clay & Lauer, Joseph R., 1979. "The Implications of Recursiveness in Capital Markets–Theory and Empirical Tests," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(1), pages 59-76, March.
  • Handle: RePEc:cup:jfinqa:v:14:y:1979:i:01:p:59-76_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109000005159/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:14:y:1979:i:01:p:59-76_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.