AN EMPIRICAL TEST OF THE ARBITRAGE PRICING THEORY
- 1 June 1984
- journal article
- Published by Wiley in Journal of Financial Research
- Vol. 7 (2) , 121-130
- https://doi.org/10.1111/j.1475-6803.1984.tb00361.x
Abstract
This paper provides an ex‐post analysis of a multifactor return‐generating model using the factor scores obtained from a common factor analysis of industry‐based portfolios. For the 1975–1980 time period, the correlations among common stock returns can be adequately explained by a three‐factor model. Furthermore, ex post, at least three factors are priced in the stock market. A brief economic interpretation of the proposed common factor is also presented.Keywords
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