IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v23y1988i3p287-99.html
   My bibliography  Save this article

An Investigation into the Role of the Market Portfolio in the Arbitrage Pricing Theory

Author

Listed:
  • Born, Jeffery A
  • Moser, James T

Abstract

This paper investigates the role of the market portfolio in the arbitrage pricing theory. The authors show that if the multifactor return-generating process put forth in the arbitrage pricing theory is valid, then unexpected deviation in the return on the market portfolio must be completely explained by unexpected deviations in the underlying return-generating factors. As well, market betas are developed as a combination of return-generating factor sensitivity coefficients. These results lead them to conclude that an empirically significant "market factor" is evidence of omitted return-generating factors, rather than evidence that the market is a factor. Finally, results obtained when market betas are regressed against factor sensi tivity coefficients are consistent with these insights. The results s uggest that there are at least three return-generating factors. This evidence does not rely on ex post pricing of estimated factors. Copyright 1988 by MIT Press.

Suggested Citation

  • Born, Jeffery A & Moser, James T, 1988. "An Investigation into the Role of the Market Portfolio in the Arbitrage Pricing Theory," The Financial Review, Eastern Finance Association, vol. 23(3), pages 287-299, August.
    • Handle: RePEc:bla:finrev:v:23:y:1988:i:3:p:287-99
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suat Teker & Oscar Varela, 1998. "A comparative analysis of security pricing using factor, macrovariable and arbitrage pricing models," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 22(2), pages 21-41, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:23:y:1988:i:3:p:287-99. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.