Chapter 4 The arbitrage pricing theory and multifactor models of asset returns

摘要: Publisher Summary The Arbitrage Pricing Theory (APT) of Ross, and extensions that theory, constitute an important branch asset pricing theory one the primary alternatives to capital model (CAPM). This chapter discusses theoretical underpinnings, econometric testing, applications APT. APT is based on a simple intuitive concept. Ross's basic insight was linear factor returns, in economy with large number available assets, implies idiosyncratic risk diversifiable equilibrium prices securities will be approximately their exposures. focuses modeling returns. relies fundamentally Theoretical derivations restriction evidence from estimates tests are also presented chapter. has led new work mathematical economics infinite-dimensional vector spaces as models maw-asset portfolio properties continuous operators these spaces. It insights about what constitutes model, how efficiently estimate cross-sectional data sets. underpinned enormous body empirical research asset-pricing relationships, related topics such performance measurement cost estimation.