Fundamentals, Factor Structure, and Multibeta Models in Large Asset Markets

Kose John and Haim Reisman

Journal of Financial and Quantitative Analysis, 1991, vol. 26, issue 1, 1-10

Abstract: The paper provides sufficient conditions under which a nonrandom economic variable specific to some asset (the dependent variable) can be represented as a linear combination of the betas of some random characteristics of the asset (the independent variables) with some economy-wide factors. This generalizes Ross' APT that proves the above in the case where the dependent variables are expected returns and the independent variables are returns. This generalization will provide a theoretical basis for many existing multibeta relationships beyond the setting of asset pricing models and, thus, motivate their wider use in empirical and theoretical research.

Date: 1991
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