A Test of APT with Maximum Sharpe Ratio

摘要：

This paper tests the asymptotic arbitrage pricing theory (APT) on individual stocks with the factors extracted by the Connor-Korajczyk method. The asymptotic APT fails if and only if the number of unbounded eigenvalues of the second-moment matrix of excess returns exceeds that of the variance matrix of excess returns by one. A test is developed using this theoretical result based on the eigenvectors extracted using the CK method. The test statistic is shown to be related to the maximum Sharpe ratio among portfolios of all individual stocks. The empirical evidence, supplemented by simulation results, lends support to the implication of the asymptotic arbitrage pricing theory.

作者: CHU ZHANG

作者单位: Department of Finance, The Hong Kong University of Science and Technology, ClearWater Bay, Kowloon, Hong Kong

会议类型: 国际会议

会议名称: 2006年中国国际金融年会

会议地点: 西安

会议语种:英文

在线出版日期: 2006-07-17（万方平台首次上网日期，不代表论文的发表时间）