EconPapers    
Economics at your fingertips  
 

A Test for the Number of Factors in an Approximate Factor Model

Gregory Connor () and Robert Korajczyk ()

Journal of Finance, 1993, vol. 48, issue 4, 1263-91

Abstract: An important issue in applications of multifactor models of asset returns is the appropriate number of factors. Most extant tests for the number of factors are valid only for strict factor models, in which diversifiable returns are uncorrelated across assets. In this paper, the authors develop a test statistic to determine the number of factors in an approximate factor model of asset returns, which does not require that diversifiable components of returns be uncorrelated across assets. They find evidence for one to six pervasive factors in the cross section of New York Stock Exchange and American Stock Exchange stock returns. Copyright 1993 by American Finance Association.

Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (221) Track citations by RSS feed

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819930 ... O%3B2-0&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:48:y:1993:i:4:p:1263-91

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2022-01-09
Handle: RePEc:bla:jfinan:v:48:y:1993:i:4:p:1263-91