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New Tests of the APT and Their Implications
Author(s) -
DHRYMES PHOEBUS J.,
FRIEND IRWIN,
GULTEKIN MUSTAFA N.,
GULTEKIN N. BULENT
Publication year - 1985
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1985.tb04988.x
Subject(s) - test (biology) , econometrics , actuarial science , computer science , economics , financial economics , geology , paleontology
This paper provides new tests of the arbitrage pricing theory (APT). Test results appear to be extremely sensitive to the number of securities used in the two stages of the tests of the APT model. New tests also indicate that unique risk is fully as important as common risk. While these tests have serious limitations, they are inconsistent with the APT.