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Multifactor Asset Pricing Models
Author(s) -
Sinclair N.A.
Publication year - 1987
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1987.tb00233.x
Subject(s) - capital asset pricing model , arbitrage pricing theory , consumption based capital asset pricing model , economics , financial economics , investment theory , econometrics , arbitrage , systematic risk , index (typography) , computer science , world wide web
Since the early 1960s, the mean‐variance Capital Asset Pricing Model (CAPM) has been a dominant paradigm in modern finance. Recently, the accumulation of anomalous evidence, and a realisation that empirical tests of the model are tautologically related to the efficiency of the market index, have pushed that paradigm to a point of crisis. This paper reviews alternative asset pricing models which coexisted with the CAPM and may provide plausible substitutes. The major distinguishing feature of these models is that they predict multiple risk factors and, with the exception of the Arbitrage Pricing Theory (APT), are extensions of the CAPM.