The APT Model as Reduced-Rank Regression

Paul Bekker, Pascal Dobbelstein and Tom Wansbeek

Journal of Business & Economic Statistics, 1996, vol. 14, issue 2, 199-202

Abstract: Integrating the two steps of an arbitrage pricing theory (APT) model leads to a reduced rank regression (RRR) model. So the results on RRR can be used to estimate APT models, making estimation very simple. The authors give a succinct derivation of estimation of RRR, derive the asymptotic variance of RRR estimators for a general cause, and discuss how undersized samples (more assets than time periods) can be dealt with.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:14:y:1996:i:2:p:199-202

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