Estimating the Arbitrage Pricing Theory Factor Sensitivities Using Quantile Regression

Zeno Adams, Roland Füss (), Philipp Grüber, Ulrich Hommel and Holger Wohlenberg

Chapter 2 in Nonlinear Financial Econometrics: Forecasting Models, Computational and Bayesian Models, 2011, pp 18-27 from Palgrave Macmillan

Abstract: Abstract One of the main insights from over 50 years of portfolio theory is the fact that investors should not hold single securities but should invest in large portfolios. The idiosyncratic risks that affect asset returns on an individual level cancel out so that only systematic risks affecting all assets in the economy have to be considered. The capital asset pricing model (CAPM) (Sharpe 1964; Lintner 1965; Black 1972) laid the cornerstone for the theory of asset pricing which has been replaced in the following years by the Fama-French model (Fama and French 1993) and the arbitrage pricing theory (APT) starting with Ross (1976).1

Keywords: Risk Premium; Asset Return; Return Distribution; Capital Asset Price Model; Idiosyncratic Risk (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-29522-3_2

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DOI: 10.1057/9780230295223_2

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