Asset Pricing with Spatial Interaction

Steven Kou (), Xianhua Peng () and Haowen Zhong ()
Additional contact information
Steven Kou: Risk Management Institute and Department of Mathematics, National University of Singapore, Singapore 119613
Xianhua Peng: Department of Mathematics, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong
Haowen Zhong: Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027

Management Science, 2018, vol. 64, issue 5, 2083-2101

Abstract: We propose a spatial capital asset pricing model and a spatial arbitrage pricing theory (S-APT) that extend the classical asset pricing models by incorporating spatial interaction. We then apply the S-APT to study the comovements of eurozone stock indices (by extending the Fama–French factor model to regional stock indices) and the futures contracts on S&P/Case–Shiller Home Price Indices; in both cases, spatial interaction is significant and plays an important role in explaining cross-sectional correlation.

Keywords: capital asset pricing model; arbitrage pricing theory; spatial interaction; real estate; factor model; property derivatives; futures (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://doi.org/mnsc.2016.2627 (application/pdf)

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:inm:ormnsc:v:64:y:2018:i:5:p:2083-2101

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().