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Bootstrapping The Number Of Factors In The Arbitrage Pricing Theory

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  • Sangit Chatterjee
  • Robert A. Pari

Abstract

The number of factors in the APT are re‐examined through a new methodology called the bootstrap, which provides a nonparametric alternative to the chi‐square test used in prior research. Results suggest that the number of statistically significant factors does not increase when the number of firms increases. Moreover, only the first factor is consistently significant across sample sizes of thirty, sixty, and ninety firms.

Suggested Citation

  • Sangit Chatterjee & Robert A. Pari, 1990. "Bootstrapping The Number Of Factors In The Arbitrage Pricing Theory," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(1), pages 15-21, March.
    • Handle: RePEc:bla:jfnres:v:13:y:1990:i:1:p:15-21
    DOI: 10.1111/j.1475-6803.1990.tb00532.x
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    Cited by:

    1. Pin-Huang Chou, 1996. "Using Bootstrap to Test Mean-Variance Efficiency of a Given Portfolio," Finance 9609002, University Library of Munich, Germany.

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