Accession Number : ADA332783

Title :   An Empirical Examination of the Robustness of Arbitrage Factors

Descriptive Note : Doctoral thesis

Corporate Author : AIR FORCE INST OF TECH WRIGHT-PATTERSONAFB OH

Personal Author(s) : Howard, Randall B.

PDF Url : ADA332783

Report Date : 09 DEC 1997

Pagination or Media Count : 154

Abstract : After thirty years of vigorous research, there is still little agreement in the field of asset pricing theory. Shanken and Smith (1996) sum up the vast amount of empirical research on asset pricing models by saying, "Although we have learned much about the cross sectional and time series properties of returns and have developed sophisticated statistical methods to increase the power of the tests, numerous unanswered questions remain." Two of the most fundamental, yet unanswered, questions are: How many factors are there? and What are those factors? The two primary equilibrium, expected return models are the Capital Asset Pricing Model (CAPM), developed almost simultaneously by Sharpe (1964), Lintner (1965), and Mossin (1966), and the Arbitrage Pricing Theory (APT), introduced by Ross (1976, 1977). The CAPM is a one factor model that states that the equilibrium rate of return on any asset is a linear function of the asset's covariance with the market portfolio. The APT, on the other hand, is a multifactor model.

Descriptors :   *COST ANALYSIS, THEORY, NUMERICAL ANALYSIS, EQUILIBRIUM(GENERAL), STATISTICAL PROCESSES, FUNCTIONS(MATHEMATICS).

Subject Categories : Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE