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Bayesian Estimation of Risk-Premia in an APT Context

Author

Listed:
  • Darsinos, T.
  • Satchell, S.E.

Abstract

Recognizing the problems of estimation error in computing risk premia via arbitrage pricing, this paper provides a Bayesian methodology for estimating factor risk premia and hence equity risk premia for both traded and non-traded factors. Some illustrative calculations based on UK equity are also provided.

Suggested Citation

  • Darsinos, T. & Satchell, S.E., 2003. "Bayesian Estimation of Risk-Premia in an APT Context," Cambridge Working Papers in Economics 0329, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0329
    Note: EM
    as

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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0329.pdf
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    More about this item

    Keywords

    Bayesian; Estimation; Arbitrage Pricing Theory; Risk Premium;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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