The Interdependent Structure of Security Returns

Michael A. Simkowitz and Dennis E. Logue

Journal of Financial and Quantitative Analysis, 1973, vol. 8, issue 2, 259-272

Abstract: In this paper the traditional capital asset pricing model is reformulated as a system of simultaneous equations in which returns on similar securities are treated as endogenous variables and in which pertinent financial data for particular firms and a market factor are treated as exogenous variables. Such a system is estimated, and serious questions are raised concerning the tenability of the simple linear model so often used to explain capital asset prices under uncertainty.

Date: 1973
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