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The Interdependent Structure of Security Returns

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  • Simkowitz, Michael A.
  • Logue, Dennis E.

Abstract

In this paper the traditional capital asset pricing model is reformulated as a system of simultaneous equations in which returns on similar securities are treated as endogenous variables and in which pertinent financial data for particular firms and a market factor are treated as exogenous variables. Such a system is estimated, and serious questions are raised concerning the tenability of the simple linear model so often used to explain capital asset prices under uncertainty.

Suggested Citation

  • Simkowitz, Michael A. & Logue, Dennis E., 1973. "The Interdependent Structure of Security Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(2), pages 259-272, March.
    • Handle: RePEc:cup:jfinqa:v:8:y:1973:i:02:p:259-272_01
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    Cited by:

    1. Pamela Parrish Peterson, 1980. "A Re-Examination Of Seemingly Unrelated Regressions Methodology Applied To Estimation Of Financial Relationships," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 3(3), pages 297-308, September.
    2. Cheng-Few Lee & Woan-lih Liang & Fu-Lai Lin & Yating Yang, 2016. "Applications of simultaneous equations in finance research: methods and empirical results," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 943-971, November.

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