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The Robustness of the APT to Alternative Estimators
Author(s) -
Clare Andrew,
Priestley Richard,
Thomas Stephen
Publication year - 1997
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00126
Subject(s) - estimator , robustness (evolution) , econometrics , capital asset pricing model , economics , stock (firearms) , computer science , mathematics , statistics , engineering , biochemistry , chemistry , gene , mechanical engineering
We test the robustness of the APT to two alternative estimation procedures: the Fama and MacBeth (1973) two‐step methodology; and the one‐step procedure due to Burmeister and McElroy (1988). We find that the APT is indeed sensitive to the chosen estimator and assumptions about the factor structure of stock returns. We believe that our findings have implications for the estimation of asset pricing models in general.