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Share Prices and Macroeconomic Factors
Author(s) -
Groenewold Fraser Nicolaas, Patricia
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.t01-1-00168
Subject(s) - economics , explanatory power , capital asset pricing model , inflation (cosmology) , econometrics , sample (material) , chen , financial economics , biology , paleontology , philosophy , chemistry , physics , epistemology , chromatography , theoretical physics
The APT with macroeconomic factors put forward by Chen, Roll and Ross (1986) was tested using monthly Australian sectoral share‐price indexes for 1980–1994. The inflation rate was found to be consistently priced. The significance of other factors was found to depend on the choice of sample period and estimation method. The model was compared to both an APT with artificial factors and the CAPM. Both versions of the APT were found to clearly out‐perform the CAPM but neither version of the APT was clearly superior to the other in terms of both within‐ and out‐of‐sample explanatory power.