Hostname: page-component-77c89778f8-gvh9x Total loading time: 0 Render date: 2024-07-17T16:51:52.108Z Has data issue: false hasContentIssue false
  • English
  • Français

General Factor Models and the Structure of Security Returns

Published online by Cambridge University Press:  06 April 2009

Lawrence Kryzanowski  and
Minh Chau To
Get access Rights & Permissions [Opens in a new window]

Extract

Based on Markowitz's pioneering study [40], Sharpe [56] and Lintner [38] advanced the first positivist formulations of the capital asset pricing model (CAPM). Their models were subsequently refined by Mossin [45], Fama [15], Black [1], and others. Even though the CAPM has been studied extensively, it has not been empirically validated. According to Roll [48], the CAPM cannot be tested in an unambiguous fashion because of a number of intractable measurement and computational difficulties, and the joint nature of the hypotheses to be tested.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 18 , Issue 1 , March 1983 , pp. 31 - 52
Copyright
Copyright © School of Business Administration, University of Washington 1983

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Black, Fischer. “Capital Market Equilibrium with Restricted Borrowing.” Journal of Business, Vol. 45 (07 1972), pp. 444–454.Google Scholar
[2]Black, Fischer; Jensen, Michael C.; and Scholes, Myron. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, Jensen, Michael C., ed. NY: Praeger Publishers (1972).Google Scholar
[3]Blattberg, Robert C., and Gonedes, Nicholas J.. “A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices.” Journal of Business, Vol. 47 (04 1974), pp. 244–280.Google Scholar
[4]Blume, Marshall E. “Portfolio Theory: A Step Towards its Practical Application.” Journal of Business, Vol. 43 (04 1970), pp. 153–173.Google Scholar
[5]Breeden, D. T. “An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities.” Journal of Financial Economics, Vol. 7 (09 1979), pp. 265–296.Google Scholar
[6]Brennan, Michael J. “Capital Asset Pricing and the Structure of Security Returns.” Working paper, University of British Columbia (01 1971).Google Scholar
[7]Brennan, Michael J. “Discussion.” Journal of Finance, Vol. 36 (05 1981), pp. 352–353.Google Scholar
[8]Brown, S., and Weinstein, M.. “The Bilinear Asset Pricing Paradigm: A New Test of the Arbitrage Pricing Model.” Working paper, Bell Laboratories (04 1982).Google Scholar
[9]Cattell, Raymond B. “The Scree Test for the Number of Factors.” Multivariate Behavioral Research, Vol. 1 (04 1966), pp. 245–275.CrossRefGoogle ScholarPubMed
[10]Chamberlain, Gary, and Rothschild, Michael. “Arbitrage and Mean-Variance Analysis on Large Asset Markets.” Working paper, University of Wisconsin (06 1981).CrossRefGoogle Scholar
[11]Chen, Nai Fu. “The Arbitrage Pricing Theory: Estimation and Application.” Working paper, U.C.L.A. (Revised 10 1979).Google Scholar
[12]Chen, Nai Fu. “Some Empirical Tests of the Theory of Arbitrage Pricing.” Working paper, University of Chicago (04 1982).Google Scholar
[13]Connor, Greg. “A Factor Pricing Theory for Capital Assets.” Working paper, Northwestern University (1981).Google Scholar
[14]Fama, Eugene F. “The Behaviorr of Stock Market Prices.” Journal of Business, Vol. 38 (1965), pp. 34–105.Google Scholar
[15]Fama, Eugene F. “Risk, Return and Equilibrium: Some Clarifying Comments.” Journal of Finance, Vol. 23 (03 1968), pp. 29–40.Google Scholar
[16]Fama, Eugene F.Foundations of Finance NY: Basic Books Inc. (1976).Google Scholar
[17]Farrar, Donald Eugene. The Investment Decision under Uncertainty. Englewood Cliffs, NJ: Prentice-Hall Inc. (1962).Google Scholar
[18]Farrel, James L. “Analyzing Covariations of Returns to Determine Homogeneous Stock Groupings.” Journal of Business, Vol. 47 (04 1974), pp. 186–207.CrossRefGoogle Scholar
[19]Fowler, David J.; Rorke, C. Harvey; and Jog, Vijay M.. “Heteroscedasticity, R2 and Thin Trading on the Toronto Stock Exchange.” Journal of Finance, Vol. 34 (12 1979), pp. 1201–1210.Google Scholar
[20]Gehr, Adam Jr “Some Tests of the Arbitrage Pricing Theory.” Journal of the Midwest Finance Association (1975), pp. 91–105.Google Scholar
[21]Gibbons, Michael. “Empirical Examination of the Return Generating Process of the Arbitrage Pricing Theory.” Working paper, Stanford University (1981).Google Scholar
[22]Hakansson, Nils H. “Capital Growth and the Mean-Variance Approach to Portfolio Selection.” Journal of Financial and Quantitative Analysis, Vol. 6 (01 1971), pp. 517–557.Google Scholar
[23]Harman, Harry H.Modern Factor Analysis, second edition. Chicago, IL: The University of Chicago Press (1967).Google Scholar
[24]Huberman, Gur. “A Simple Approach to Arbitrage Pricing Theory.” Working paper no. 44, University of Chicago (revised 12 1980).Google Scholar
[25]Hughes, Patricia. “A Test of the Arbitrage Pricing Theory.” Working paper, University of British Columbia (08 1981).Google Scholar
[26]Ingersoll, Jonathan E. “Some Results in the Theory of Arbitrage Pricing.” University of Chicago (revised 04 1982).Google Scholar
[27]Jensen, Michael C., ed. Studies in the Theory of Capital Markets. NY: Praeger Publishers (1972).Google Scholar
[28]Johnston, J.Econometric Methods, second edition. NY: McGraw-Hill Book Co. (1962).Google Scholar
[29]Kaiser, Henry F. “The Varimax Criterion for Analytic Rotation in Factor Analysis.” Psychometrika, Vol. 23 (09 1958), pp. 187–200.CrossRefGoogle Scholar
[30]Kaiser, Henry F. “Image Analysis.” In Problems in Measuring Changes, Harris, Chester W., ed. Madison, WI: The University of Wisconsin Press (1963).Google Scholar
[31]Kaiser, Henry F., and Caffrey, John. “Alpha Factor Analysis.” Psychometrika, Vol. 30 (03 1965), pp. 1–14.CrossRefGoogle ScholarPubMed
[32]King, Benjamin F. “Market and Industry Factors in Stock Price Behavior.” Journal of Business, Vol. 39 (01 1966), pp. 139–190.CrossRefGoogle Scholar
[33]Kraus, Alan, and Litzenberger, Robert. “Skewness Preference and the Valuation of Risky Assets.” Journal of Finance, Vol. 31 (09 1976), pp. 1085–1100.Google Scholar
[34]Kryzanowski, Lawrence. “The Efficacy of Trading Suspensions: A Regulatory Action Designed to Prevent the Exploitation of Monopoly Information.” Journal of Finance, Vol. 34 (12 1979), pp. 1187–1200.Google Scholar
[35]Kryzanowski, Lawrence, and To, Minh Chau. “The Telescopic Effect of Past Return Realizations on Ex Post Beta Estimates.” Working paper, Concordia University (revised 06 1982).Google Scholar
[36]Kryzanowski, Lawrence, and To, Minh Chau “On Traditional Market Models as Return Generating Models.” The Financial Review, Vol. 17 (09 1982), pp. 165–173.CrossRefGoogle Scholar
[37]Kryzanowski, Lawrence, and To, Minh Chau “The E-V Stationarity of Security Returns: Some Empirical Results”. Working paper, Concordia University (04 1981).Google Scholar
[38]Lintner, John. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics, Vol. 47 (02 1965), pp. 13–67.CrossRefGoogle Scholar
[39]Livingston, Miles. “Industry Movements of Common Stocks.” Journal of Finance, Vol. 32 (06 1977), pp. 861–874.Google Scholar
[40]Markowitz, Harry. Portfolio Selection: Efficient Diversification of Investments. NY: John Wiley and Sons, Inc. (1959).Google Scholar
[41]Merton, Robert C. “An Inter-Temporal Capital Asset Pricing Model.” Econometrica, Vol. 41 (09 1973), pp. 867–887.Google Scholar
[42]Meyers, Stephen L. “A Re-Examination of Market and Industry Factors in Stock Price Behavior.” Journal of Finance, Vol. 28 (06 1973), pp. 695–705.Google Scholar
[43]Morin, Roger. “Capital Asset Pricing Theory: The Canadian Experience.” Ph.D. thesis, The University of Pennsylvania (1976).Google Scholar
[44]Morrison, Donald F.Multivariate Statistical Methods. NY: McGraw-Hill Book Company (1976).Google Scholar
[45]Mossin, Jan. “Equilibrium in a Capital Asset Market.” Econometrica, Vol. 34 (10 1966), pp. 768–783.CrossRefGoogle Scholar
[46]Oldfield, George Jr, and Rogalski, Richard J.. “Treasury Bill Factors and Common Stock Returns.” The Journal of Finance, Vol. 36 (05 1981), pp. 337–350.Google Scholar
[47]Reinganum, Marc R. “A Simple Test of the Arbitrage Pricing Theory.” Working paper, University of Southern California (revised 08 1980).Google Scholar
[48]Roll, Richard. “A Critique of Asset Pricing Theory's Tests; Part 1: On Past and Potential Testability of the Theory.” Journal of Financial Economics, Vol. 4 (03 1977), pp. 129–176.Google Scholar
[49]Roll, Richard. “Orthogonal Portfolios.” Journal of Financial and Quantitative Analysis, Vol. 15 (12 1980), pp. 1005–1023.Google Scholar
[50]Roll, Richard, and Ross, Stephen A.. “An Empirical Investigation of the Arbitrage Pricing Theory.” Journal of Finance, Vol. 35 (12 1980), pp. 1073–1103.Google Scholar
[51]Rosenberg, Barr, and McKibben, Walt. “The Prediction of Systematic and Specific Risk in Common Stocks.” Journal of Financial and Quantitative Analysis, Vol. 8 (03 1973), pp. 317–333.CrossRefGoogle Scholar
[52]Rosenberg, Barr, and Marathe, Vinay. “Common Factors in Security Returns: Microeconomic Determinants and Macroeconomic Correlates.” Reprint No. 26, Institute of Business and Economic Research, University of California, Berkeley (05 1976).Google Scholar
[53]Rosenberg, Barr, and Marathe, Vinay. “The Arbitrage Theory of Capital Asset Pricing.” Journal of Economic Theory, Vol. 13 (12 1976), pp. 341–360.Google Scholar
[54]Rosenberg, Barr, and Marathe, Vinay “The Current Status of the Capital Asset Pricing Model (CAPM).” Journal of Finance, Vol. 33 (06 1978), pp. 885–901.Google Scholar
[55]Rummel, R. J.Applied Factor Analysis (Evanston, IL: Northwestern University Press (1970).Google Scholar
[56]Sharpe, William F. “A Simplified Model for Portfolio Analysis.” Management Science, (01 1963), pp. 277–293.CrossRefGoogle Scholar
[57]Stone, B. K. “Systematic Interest–Rate Risk in a Two-Index Model of Returns.” Journal of Financial and Quantitative Analysis, Vol. 9 (11 1974), pp. 709–725.CrossRefGoogle Scholar