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A Test of the Cross‐Sectional Robustness of the Arbitrage Pricing Model Using Foreign Exchange Rates *
Author(s) -
McGowan Carl B.,
Tandon Kishore
Publication year - 1989
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1989.tb01402.x
Subject(s) - robustness (evolution) , econometrics , arbitrage , arbitrage pricing theory , exchange rate , economics , computer science , financial economics , capital asset pricing model , monetary economics , biochemistry , chemistry , gene
This paper tests the cross‐sectional robustness of the arbitrage pricing theory (APT) model using foreign exchange rate data to determine if the model is robust with respect to the various random samples and various factor analytic techniques. Factor scores are developed using various samples and factor analytic techniques to explain the returns for other samples and groupings. The APT model is found to be robust across samples and techniques.