Measuring the pricing error of the arbitrage pricing theory.
- Resource Type
- Article
- Authors
- Geweke, J; Zhou, G
- Source
- Review of Financial Studies; Summer96, Vol. 9 Issue 2, p557, 31p
- Subject
- PRICING
BAYESIAN analysis
PORTFOLIO management (Investments)
ERROR analysis in mathematics
MATHEMATICAL models
- Language
- ISSN
- 08939454
Proposes an exact Bayesian framework for examining the arbitrage pricing theory (APT) pricing restrictions. Framework of the APT restrictions and Bayesian inference; Application of the approach to portfolio returns grouped by both industry and size; Reduction in the pricing error; Risk measures in the APT model; Comparison of the market index with the APT factor.