This paper examines empirically, issues concerning the Arbitrage Pricing Theory (APT). Firstly, in the spirit of Chamberlain and Rothschild , the existence of an approximate factor structure is explored. Secondly, following Beggs  and employing a principal components approach, a test of arbitrage pricing and the importance of the error of approximation, is conducted. Finally, using a non nested framework, the APT and CAPM are tested against each other. The results show mixed support for the APT having up to 3 priced factors.
|Number of pages||21|
|Journal||Accounting & Finance|
|Publication status||Published - Nov 1988|