The Arbitrage Pricing Theory: Estimation and Applications

Nai-Fu Chen

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: The pricing equation of Ross' (1976) APT model is derived using estimable parameters. Estimation errors are discussed in the framework of elementary perturbation analysis. Theoretically, a simple link is provided among the mean-variance efficient set mathematics, mutual fund separations, discrete and continuous time CAPM, option pricing model, term structure of interest rate, capital budgeting, portfolio ranking, Modigliani Miller theorems with the APT.

Date: 1980-06-01
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