Some Empirical Tests of the Theory of Arbitrage Pricing

Chen, Nai-Fu

doi:10.1111/j.1540-6261.1983.tb03831.x

Cited by 238 publications

(110 citation statements)

References 30 publications

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“…Likewise, Abeysekera and Mahajan (1987, p. 388) did not obtain any significant risk premium when testing the APT model in the London Stock Market. However, Chen (1983Chen ( , p. 1393Chen ( ,1397 gave evidence of the APT model and opposed to Reinganum (1981)'s proposal, verifying that in the USA market the APT model remains strong to inclusion of firm size and own variance, as these two variables did not show additional explanatory value. Besides, Bower et al (1984Bower et al ( , p. 1041 have observe in the same market that the APT model offers a better sign of risk and also better estimates of the expected return than a single-factor model.…”

Section: Literature Reviewmentioning

confidence: 98%

Which are the risk factors in the pricing of Personal Pension Plans in Spain?

Padrón¹,

Boza²

2006

Rev. Bras. Econ.

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Contents: 1. Introduction; 2. Literature Review; 3. Sample description; 4. Testing Methodology; 5. Empirical results of testing the APT model; 6. Test of the model suggested by Chen et al. (1986); 7. Conclusions.The aim of this paper is to analyse if the Arbirtrage Pricing Theory or the model suggested by Chen et al. (1986) can efficiently explain the variability of the cross-sectional returns on the Personal Pension Plans in Spain between 1995-2003, as well as to find their sources of risks. To test both models we have followed the traditional two-step cross-sectional regressions by Fama and MacBeth (1973). The results of our analysis show two significant risk factors derived from the fixed-income market: nonanticipated changes in the interest rate term structure and the default risk premium. Chen et al. (1986) Este artigo analisa se o modelo APT ou o modelo sugerido por

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Section: Literature Reviewmentioning

confidence: 98%

Which are the risk factors in the pricing of Personal Pension Plans in Spain?

Padrón¹,

Boza²

2006

Rev. Bras. Econ.

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“…As a pioneering work in the area, Chen (1983) gave an economic interpretation to statistical factors. In their popular work, Chen, Roll and Ross (1986) use a six factor model based on monthly data for the period of 1953-1983 and found industrial production, risk premium and term structure premium as the significant determinants of stock returns in U.S market.…”

Section: Review Of Literaturementioning

confidence: 99%

Time Varying Macroeconomic Risk and Industry Stock Returns: Empirical Evidence from India

Nair

2013

AJFA

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This paper searches further evidence for the relation between the time varying macroeconomic conditions and stock returns in India using monthly data during the post 2000 period. Unlike other research in the area, the study uses industry level stock price data on six sectors namely Banking, Energy, FMCG, Information Technology, Pharmaceuticals and Automobiles. Data availability and diverging business cycle sensitivity constitute the rationale behind the selection of industry groupings. Empirical methodology involves a multi-factor modeling using Generalized Auto Regressive conditional Heteroskedasticity (GARCH) model. The results of the study proved that the expected premium on stock market investments in India was time varying and has been affected by the time varying conditional volatilities of macroeconomic factors. The impact of economic changes found different across the industries and the sectoral variations in stock returns confirm the potentials of industry allocation for the diversification of investment risks.

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“…El pri me ro es el aná li sis fac to rial, que bus ca de ter mi nar coe fi cien tes de sen si ti vi dad (Fac tor Loa dings); 3 és te con sis te en un aná li sis al go rít -mi co de la ma triz es ti ma da de co va rian za de tí tu los (véa se Roll y Ross, 1980;Chen, 1983; Leh man y Mo dest, 1988). Los otros mé to dos son el de va ria bles ma croe co nó mi cas, en las que el in ves ti ga dor, ba sa do úni ca men te en su jui cio, es co ge fac to res, 4 pa ra lue go es ti mar los coefi cien tes de sen si ti vi dad y ve ri fi car si ellos ex pli can el cor te trans -…”

Section: Introductionunclassified

Factores macroeconómicos en rendimientos accionarios chilenos

2017

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FACTORES MACROECONÓMICOS EN RENDIMIENTOS ACCIONARIOS CHILENOS* Ro dri go Fuen tes S. M., Jor ge Gre goi re C. y Sal va dor Zu ri ta L.** RESUMENEl pre sen te ar tícu lo se en mar ca en la teo ría de pre cios por ar bi tra je (TPA) (Ross, 1976a) de la ver tien te de va ria bles ma croe co nó mi cas, que tie ne la ven ta ja (en com pa ra ción con el aná li sis fac to rial) de per mi tir la in ter pre tación eco nó mi ca de los fac to res y los pre mios por ries go fac to ria les. Si mi lar a Bur meis ter y McElroy (1988), con si de ra mos cua tro fac to res ma croe co nó micos me di dos y un fac tor no ob ser va do; la pre sen cia de fac to res no ob ser vados es una ge ne ra li za ción del tra ba jo pre vio de Chen, Roll y Ross (1986). Par tien do del mo de lo de fac to res, la TPA im po ne res tric cio nes, las que son com pro ba das em pí ri ca men te en el pe rio do [1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003]. Ade más, el mo de lo de va lo ra ción de ac ti vos de ca pi tal (MVAC) está ani da do en la TPA, lo que permi te so me ter a prue ba el mo de lo MVAC. Nues tros re sul ta dos son: i) la res tricción de la TPA no es re cha za da por los da tos; ii) las sor pre sas en la tasa de cre ci mien to del ín di ce men sual de ac ti vi dad eco nó mi ca (Ima cec), en el pre cio del co bre y del pe tró leo apa re cen como fac to res con pre mios por ries go es tadís ti ca men te dis tin tos de 0 en los ren di mien tos ac cio na rios chi le nos; mien tras que las sor pre sas en in fla ción no apa re cen pre cia das en la mues tra, y iii) el mo de lo MVAC es fuer te men te re cha za do por los da tos, en fa vor de la TPA. ABSTRACTThis pa per fo llows the ma croe co no mic va ria bles tra di tion of the APT of Ross (1976a), which has the ad van ta ge (in com pa ri son with the Fac tor Analy sis ap proach) of allo wing an eco no mic in ter pre ta tion of both the com mon factors and the risk pre mia. Si mi lar to Bur meis ter and McElroy (1988), we consi der four mea su red ma croe co no mic fac tors, and one unob ser ved fac tor. The exis ten ce of unob ser ved fac tors is a ge ne ra li za tion of the pre vious work by Chen, Roll and Ross (1986). We test the res tric tions that the APT im po ses on a ge ne ral fac tor mo del in the pe riod 1990-2003. In ad di tion, the CAPM is nes ted in the APT, which allows us to test the CAPM. Our em pi ri cal re sults are: (a) the APT res tric tion is not re jec ted by the data, (b) the in no va tions in the rate of growth of the Ima cec (a monthly in di ca tor of ge ne ral eco no mic growth), of the pri ce of cop per, and of the pri ce of oil, are pri ced fac tors in the sam ple, whi le the in no va tion in in fla tion ra tes does not have a sta tis tically sig ni fi cant pre mium in the sam ple, and (c) the CAPM is strongly re jec ted by the data, in fa vor of the APT. INTRODUCCIÓN 1El mo de lo de la TPA de Ross (1976a) su po ne que los in di vi duos tie nen creen cias ho mo gé neas en cuan to al pro ce so es to cás ti co ge ne ra dor de re...

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Some Empirical Tests of the Theory of Arbitrage Pricing

Cited by 238 publications

References 30 publications

Which are the risk factors in the pricing of Personal Pension Plans in Spain?

Which are the risk factors in the pricing of Personal Pension Plans in Spain?

Time Varying Macroeconomic Risk and Industry Stock Returns: Empirical Evidence from India

Factores macroeconómicos en rendimientos accionarios chilenos

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