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An Empirical Investigation of the Arbitrage Pricing Theory

Roll, Richard and Ross, Stephen A. (1980) An Empirical Investigation of the Arbitrage Pricing Theory. Journal of Finance, 35 (5). pp. 1073-1103. ISSN 0022-1082. doi:10.1111/j.1540-6261.1980.tb02197.x.

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Empirical tests are reported for Ross' [48] arbitrage theory of asset pricing. Using data for individual equities during the 1962–72 period, at least three and probably four priced factors are found in the generating process of returns. The theory is supported in that estimated expected returns depend on estimated factor loadings, and variables such as the own standard deviation, though highly correlated (simply) with estimated expected returns, do not add any further explanatory power to that of the factor loadings.

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Additional Information:© 1980 the American Finance Association. The comments and suggestions of listeners to our preliminary results on this subject have been invaluable in improving many half-baked procedures. To the extent that our souffle is finally ready to come out of the oven, we owe a particular debt to participants in seminars at Berkeley/Stanford, Laval, Karlsruhe, and Southern California, and to the participants in the conference on "new issues in the asset pricing model" held at Coeur d'Alene, Idaho, and sponsored by Washington State University. This work originated while the authors were Leslie Wong summer fellows at the University of British Columbia in 1977. Comments by Michael Brennan, Thomas Copeland and Richard McEnally have been especially helpful. Of course, no one but us can be held responsible for remaining errors.
Issue or Number:5
Record Number:CaltechAUTHORS:20190507-075335032
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Official Citation:ROLL, R. and ROSS, S. A. (1980), An Empirical Investigation of the Arbitrage Pricing Theory. The Journal of Finance, 35: 1073-1103. doi:10.1111/j.1540-6261.1980.tb02197.x
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:95277
Deposited By: Tony Diaz
Deposited On:07 May 2019 18:37
Last Modified:16 Nov 2021 17:11

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