Are Returns in the International Economy Explained by a Single or Multi-Factor Structure?

S Davidson, Robert Faff and H Mitchell

Studies in Economics and Econometrics, 2002, vol. 26, issue 1, 17-32

Abstract: This paper examines whether the CAPM beta is a good proxy for the factor loadings of the APT in an international setting. We investigate this question using monthly national market index data drawn from the Morgan Stanley Capital International database, over the twenty-five year period 1970 to 1994. While we find evidence that the international CAPM beta is a consensus measure of up to four return generating factors, the international factor loadings provide a poor explanation of returns.

Date: 2002
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DOI: 10.1080/10800379.2002.12106323

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