Using Canonical Correlation to Identify Arbitrage Pricing Theory Factors

Abstract

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Common factors in international securitized real estate markets

“…The main question to be addressed under this line of APT research is “if there are multiple factors affecting security returns, what might they be? “ Fogler, John and Tipton (1981), McGowan and Dobson (1993), Christofi, Chriostofi and Philippatos (1993) and Cheng (1995) apply these techniques and are able to establish a significant statistical and economic relationship between stock market returns and macroeconomic factors. Cheng (1998) employs the factor analytic technique and canonical correlation analysis to examine the international transmission mechanism of the UK and US stock market movements and the relationship between the UK and the US economic indictors.…”