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The robustness of tests of structural change in equity returns using factor analysis

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  • David Morelli

Abstract

The objective of this paper is to perform various tests of structural change within the context of factor analysis and determine how robust the results of such tests are to; the security selection criteria in constructing portfolios, portfolio size, and methods of factor extraction. The question of a possible structural change is addressed by examining the Stock Market Crash of October 1987. Monthly returns on 257 securities listed on the London Stock Exchange covering the period January 1976 to December 1995 are used. The data period incorporates the Stock Market Crash of October 1987.

Suggested Citation

  • David Morelli, 2002. "The robustness of tests of structural change in equity returns using factor analysis," Applied Economics, Taylor & Francis Journals, vol. 34(2), pages 241-251.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:2:p:241-251
    DOI: 10.1080/00036840110036279
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    References listed on IDEAS

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    4. David Morelli, 1999. "Tests of structural change using factor analysis in equity returns," Applied Economics Letters, Taylor & Francis Journals, vol. 6(4), pages 203-207.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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