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Factor Models and the Ross-Huberman APT

In: Mathematical Financial Economics

Author

Listed:
  • Igor V. Evstigneev

    (University of Manchester)

  • Thorsten Hens

    (University of Zurich)

  • Klaus Reiner Schenk-Hoppé

    (University of Manchester)

Abstract

The chapter focuses on multifactor models. It begins with an analysis of their simplified version: the exact factor model. To examine it, the no-arbitrage hypothesis is introduced. The main result is the exact factor pricing theorem, which is proved by using this hypothesis. The highlight of the chapter is the Ross-Huberman Arbitrage Pricing Theory dealing with a model of a “large” asset market and establishing an “approximate” factor pricing theorem. The main assumption under which this result is obtained is an asymptotic version of the no-arbitrage hypothesis.

Suggested Citation

  • Igor V. Evstigneev & Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2015. "Factor Models and the Ross-Huberman APT," Springer Texts in Business and Economics, in: Mathematical Financial Economics, edition 127, chapter 9, pages 69-81, Springer.
    • Handle: RePEc:spr:sptchp:978-3-319-16571-4_9
    DOI: 10.1007/978-3-319-16571-4_9
    as

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