TY - JOUR
T1 - A Multivariate Test of an Equilibrium APT with Time Varying Risk Premia in the Australian Equity Market
AU - Faff, Robert W.
N1 - Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.
PY - 1993/12
Y1 - 1993/12
N2 - This paper applies an asymptotic principal components technique, developed by Connor and Korajczyk (1988), to test an equilibrium version of the Arbitrage Pricing Theory (APT), which permits time varying risk premia, using Australian equity data. Cross-equation restrictions imposed by the APT on a multivariate regression of excess returns on derived factors are tested. Both one-step and iterative versions of the technique are used and results are compared to the capital asset pricing model (CAPM). While the APT appears to perfor M better than the CAPM, neither model can adequately explain monthly seasonal mispricing in Australian equities.
AB - This paper applies an asymptotic principal components technique, developed by Connor and Korajczyk (1988), to test an equilibrium version of the Arbitrage Pricing Theory (APT), which permits time varying risk premia, using Australian equity data. Cross-equation restrictions imposed by the APT on a multivariate regression of excess returns on derived factors are tested. Both one-step and iterative versions of the technique are used and results are compared to the capital asset pricing model (CAPM). While the APT appears to perfor M better than the CAPM, neither model can adequately explain monthly seasonal mispricing in Australian equities.
UR - http://www.scopus.com/inward/record.url?scp=84976985264&partnerID=8YFLogxK
U2 - 10.1177/031289629301700204
DO - 10.1177/031289629301700204
M3 - Article
AN - SCOPUS:84976985264
SN - 0312-8962
VL - 17
SP - 233
EP - 258
JO - Australian Journal of Management
JF - Australian Journal of Management
IS - 2
ER -