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BOOTSTRAPPING THE NUMBER OF FACTORS IN THE ARBITRAGE PRICING THEORY
Author(s) -
Chatterjee Sangit,
Pari Robert A.
Publication year - 1990
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1990.tb00532.x
Subject(s) - bootstrapping (finance) , nonparametric statistics , econometrics , statistics , sample (material) , statistical hypothesis testing , arbitrage , statistical arbitrage , economics , sample size determination , test (biology) , chi square test , mathematics , arbitrage pricing theory , actuarial science , financial economics , capital asset pricing model , risk arbitrage , paleontology , chemistry , chromatography , biology
The number of factors in the APT are re‐examined through a new methodology called the bootstrap, which provides a nonparametric alternative to the chi‐square test used in prior research. Results suggest that the number of statistically significant factors does not increase when the number of firms increases. Moreover, only the first factor is consistently significant across sample sizes of thirty, sixty, and ninety firms.