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Empirical Tests of the APT

Empirical Tests of the APT - Empirical Tests of the APT...

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9-1 Roll-Ross Study (1980) The methodology used in the study is as follows Estimate the expected returns and the factor coefficients from time-series data on individual asset returns Use these estimates to test the basic cross- sectional pricing conclusion implied by the APT The authors concluded that the evidence generally supported the APT, but acknowledged that their tests were not Empirical Tests of the APT
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9-2 Extensions of the Roll-Ross Study Cho, Elton, and Gruber (1984) examined the number of factors in the return- generating process that were priced Dhrymes, Friend, and Gultekin (1984) reexamined techniques and their limitations and found the number of factors varies with the size of the portfolio Connor and Korajczyk (1993) developed a test that identifies the number of factors in a model that does allow the unsystematic Empirical Tests of the APT
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9-3 The APT and Stock Market Anomalies Small-firm Effect Reinganum: Results inconsistent with the APT
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