Empirical Tests of the APT

Empirical Tests of the APT - 9-1Roll-Ross Study (1980)The...

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Unformatted text preview: 9-1Roll-Ross Study (1980)The methodology used in the study is as followsEstimate the expected returns and the factor coefficients from time-series data on individual asset returnsUse these estimates to test the basic cross-sectional pricing conclusion implied by the APTThe authors concluded that the evidence generally supported the APT, but acknowledged that their tests were not Empirical Tests of the APT9-2Extensions of the Roll-Ross StudyCho, Elton, and Gruber (1984) examined the number of factors in the return-generating process that were pricedDhrymes, Friend, and Gultekin (1984) reexamined techniques and their limitations and found the number of factors varies with the size of the portfolioConnor and Korajczyk (1993) developed a test that identifies the number of factors in a Empirical Tests of the APT9-3The APT and Stock Market AnomaliesSmall-firm EffectReinganum: Results inconsistent with the APTChen: Supported the APT model over CAPMJanuary Anomaly...
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Empirical Tests of the APT - 9-1Roll-Ross Study (1980)The...

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