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Fundamentals, Factor Structure, and Multibeta Models in Large Asset Markets

Published online by Cambridge University Press:  06 April 2009

Kose John  and
Haim Reisman
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Abstract

The paper provides sufficient conditions under which a nonrandom economic variable specific to some asset (the dependent variable) can be represented as a linear combination of the betas of some random characteristics of the asset (the independent variables) with some economy-wide factors. This generalizes Ross' APT that proves the above in the case where the dependent variables are expected returns and the independent variables are returns. This generalization will provide a theoretical basis for many existing multibeta relationships beyond the setting of asset pricing models and, thus, motivate their wider use in empirical and theoretical research.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 26 , Issue 1 , March 1991 , pp. 1 - 10
Copyright
Copyright © School of Business Administration, University of Washington 1991

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