A Test of the Apt In Pricing Uk Stocks

Abeysekera, Sarath P.; Mahajan, Arvind

doi:10.1111/j.1468-5957.1987.tb00101.x

Cited by 16 publications

(19 citation statements)

References 52 publications

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“…These results are largely consistent with the findings of CCH and CCR (op cit. ), but are inconsistent with those of Abeysekera and Mahajan (1987) who, using factor analysis, find that only one factor is priced in the UK market for the period 1971 to 1982, or Beenstock and Chan (1986), who find that up to 20 factors may be priced. Further, the return on the market has no additional role to play once these macroeconomic factors are included.…”

contrasting

confidence: 65%

Macroeconomic Factors, the Apt and the Uk Stockmarket

Clare

Thomas

1994

Business Fin & Account

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This paper examines the macroeconomic sources of risk priced in the UK stockmarket between 1983 and 1990 using monthly data on 840 stocks to form both beta‐sorted and market value sorted portfolios using the methodology proposed by Chen, Roll and Ross (1986) and Chan, Chen and Hsieh (1985) for the US. We find that several intuitively plausible macroeconomic variables were priced over this period using the beta sorted portfolios and that once these variables are included there is little role for the return on the market. However, when the market value sorted portfolios were used only inflation and a measure of equity market ‘expense’ relative to gilts was priced; furthermore with the market value sorted portfolios a role for the market return was found.

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contrasting

confidence: 65%

Macroeconomic Factors, the Apt and the Uk Stockmarket

Clare

Thomas

1994

Business Fin & Account

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“…Nevertheless, Reinganum (1981) rejected statistical APT as a means of explaining stock price variations for the NYSE and AMEX, as did Gómez-Bezares et al (1994), Nieto (2001), and Carbonell et al (2003) for the Spanish Stock Exchange (SSE). Moreover, Abeysekera et al (1987) obtained mixed results for the London Stock Exchange, as did Jordán et al (2003) for the Spanish Mutual Funds Market.…”

mentioning

confidence: 71%

Estimation of the underlying structure of systematic risk with the use of principal component analysis and factor analysis

Cortés¹,

Porras²

2014

Contaduría y Administración

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We present an improved methodology to estimate the underlying structure of systematic risk in the Mexican Stock Exchange with the use of Principal Component Analysis and Factor Analysis. We consider the estimation of risk factors in an Arbitrage Pricing Theory (APT) framework under a statistical approach, where the systematic risk factors are extracted directly from the observed returns on equities, and there are two differentiated stages, namely, the risk extraction and the risk attribution processes. Our empirical study focuses only on the former; it includes the testing of our models in two versions: returns and returns in excess of the riskless interest rate for weekly and daily databases, and a two-stage methodology for the econometric contrast. First, we extract the underlying systematic risk factors by way of both, the standard linear version of the Principal Component Analysis and the Maximum Likelihood Factor Analysis estimation. Then, we estimate simultaneously, for all the system of equations, the sensitivities to the systematic risk factors (betas) by weighted least squares. Finally, we test the pricing model with the use of an average cross-section methodology via ordinary least squares, corrected by heteroskedasticity and autocorrelation consistent covariances estimation. Our results show that although APT is very sensitive to the extraction technique utilized and to the number of components or factors retained, the evidence found partially supports the APT according to the methodology presented and the sample studied.

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“…The Arbitrage Pricing Theory (APT) of Ross (1976) has been intensively investigated in the United States. However, there are relatively few empirical investigations on the application of APT to the pricing of UK stocks (e.g., Diacogiannis, 1986; and Abeysekera and Mahajan, 1987).…”

Section: Introductionmentioning

confidence: 99%

The Uk Stock Market and Economic Factors: A New Approach

Cheng

1995

Business Fin & Account

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A Test of the Apt In Pricing Uk Stocks

Cited by 16 publications

References 52 publications

Macroeconomic Factors, the Apt and the Uk Stockmarket

Macroeconomic Factors, the Apt and the Uk Stockmarket

Estimation of the underlying structure of systematic risk with the use of principal component analysis and factor analysis

The Uk Stock Market and Economic Factors: A New Approach

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