THE MAGNITUDE OF PRICING ERRORS IN THE ARBITRAGE PRICING THEORY

Ashok Robin and Ravi Shukla

Journal of Financial Research, 1991, vol. 14, issue 1, 65-82

Abstract: In this paper the arbitrage pricing theory (APT) pricing errors for individual securities are estimated employing maximum likelihood factor analysis and Fama‐MacBeth style aggregation. Results show that the pricing errors are large and statistically significant and that there is a high degree of variability in pricing errors across securities. This evidence contradicts the prevailing APT intuition that the pricing errors can be ignored as negligible. Pricing errors are also found to be related to residual variance and firm size.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/j.1475-6803.1991.tb00645.x

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:jfnres:v:14:y:1991:i:1:p:65-82

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

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