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  • 1
    Electronic Resource
    Electronic Resource
    Multivariate regression tests of the arbitrage pricing theory: The instrumental-variables approach (1991)
    Springer
    Review of quantitative finance and accounting 1 (1991), S. 191-208 
    Details
    ISSN: 1573-7179
    Keywords: arbitrage pricing theory ; instrumental-variables approach ; OLS method ; proxy problem
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract This article expands the theoretical basis upon which empirical testing of the arbitrage pricing theory (APT) rests. Specifically, it specifies linear restrictions for worlds in which the APT holds. These restrictions may, in principle, be tested. Since the regressors in the model are only “noisy” proxies for a specific linear transformation of the factors or mimicking portfolios, testing regressions suffer from an errors-in-variables problem. The standard econometric treatment for this problem is the instrumental-variables approach. A size-based example is employed to compare the test results derived from the instrumental-variables approach to those obtained via the ordinary least squares (OLS) method. The results from both methods cannot reject a two-factor APT for the size-sorted portfolio sample.
    Type of Medium: Electronic Resource
    URL: http://dx.doi.org/10.1007/BF02409672
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    Paper (German National Licenses)
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  • 2
    Electronic Resource
    Electronic Resource
    Incomplete-information capital market equilibrium with heterogeneous expectations and short sale restrictions (1996)
    Springer
    Review of quantitative finance and accounting 7 (1996), S. 119-136 
    Details
    ISSN: 1573-7179
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract This article extends Merton's (1987) asset-pricing model under incomplete information to consider the situation when investors' beliefs are divergent and short selling is restricted. The article finds that the diversity of beliefs increases the mean variance inefficiency of the market portfolio and the shadow cost of information. However, the inefficiency of the market portfolio due to divergent beliefs is mitigated by short-sale restrictions. The article also finds that the effect of firm size is intertwined with the residual return variance risk. Consistent with the findings of Levy (1978) and Carroll and Wei (1988), the residual return variance plays an important role in determining the risk and risk premium of each security. Finally, the shadow cost of information is larger and the equilibrium security return is higher when expectations are more diverse. And the effects of divergent beliefs on both information cost and required rates of returns are negatively related to the relative size of investor base for a particular security.
    Type of Medium: Electronic Resource
    URL: http://dx.doi.org/10.1007/BF00243974
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    Paper (German National Licenses)
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