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On the Robustness of the Roll and Ross Arbitrage Pricing Theory

Author

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  • Cho, D. Chinhyung
  • Elton, Edwin J.
  • Gruber, Martin J.

Abstract

Roll and Ross [6] have written what has quickly become the classic article on testing the Arbitrage Pricing Theory (APT) originally proposed by Ross [8]. They presented methods both for estimating the return generating process and for testing whether particular elements (factors) in the return generating process were priced in equilibrium. They found that more factors are priced than one would expect to be priced if the Capital Asset Pricing Model (CAPM) were held.

Suggested Citation

  • Cho, D. Chinhyung & Elton, Edwin J. & Gruber, Martin J., 1984. "On the Robustness of the Roll and Ross Arbitrage Pricing Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(1), pages 1-10, March.
    • Handle: RePEc:cup:jfinqa:v:19:y:1984:i:01:p:1-10_01
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    Cited by:

    1. Ladrón de Guevara Cortés Rogelio & Torra Porras Salvador, 2014. "Estimation of the underlying structure of systematic risk with the use of principal component analysis and factor analysis," Contaduría y Administración, Accounting and Management, vol. 59(3), pages 197-234, julio-sep.
    2. José de Jesús Edmundo Almazán Barquet & Humberto Valencia Herrera, 2014. "Modelo multifactorial para pronosticar el rendimiento de las acciones en el mercado mexicano de valores," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 8(1), pages 79-98.
    3. Kevin P. Evans & Alan E. H. Speight, 2006. "Real‐Time Risk Pricing Over the Business Cycle: Some Evidence for the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1‐2), pages 263-283, January.
    4. Elton, Edwin J. & Gruber, Martin J., 1997. "Modern portfolio theory, 1950 to date," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1743-1759, December.
    5. Erdinc Altay, 2003. "The Effect of Macroeconomic Factors on Asset Returns: A Comparative Analysis of the German and the Turkish Stock Markets in an APT Framework," Finance 0307006, University Library of Munich, Germany.
    6. Ulf Nielsson, 2007. "Interdependence of Nordic and Baltic Stock Markets," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(2), pages 9-28, January.
    7. Saban Celik, 2012. "Theoretical and Empirical Review of Asset Pricing Models:A Structural Synthesis," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 141-178.
    8. Michael C. Ehrhardt, 1987. "Arbitrage Pricing Models: The Sufficient Number Of Factors And Equilibrium Conditions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 10(2), pages 111-120, June.
    9. Padrón, Yaiza García & Boza, Juan García, 2006. "Which are the Risk Factors in the Pricing of Personal Pension in Spain?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 60(2), November.

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