Asymptotic Arbitrage and the APT with or Without Measure-Theoretic Structures

A. Khan and Yeneng Sun ()

Papiers d'Economie Mathématique et Applications from Université Panthéon-Sorbonne (Paris 1)

Abstract: We present a version of the APT based on an asset index set of an arbitrary infinite cardinality. Under assumptions due to Ross and Chamberlain-Rothschild, we shhow that in the absence of gains from asymptotic arbitrage, the square of the deviations of the individual rates of return from a factor-pricing formula sum to a finite number ; and that this absence, while sufficient, is not necessary for the formula to hold. We relate these results to recent work, and explain, in particular, how a version of the APT exhibits several inconsistencies when the index set is the Lebesgue unit interval.

Keywords: ARBITRAGE; PRICING; COSTS (search for similar items in EconPapers)
JEL-codes: C60 G12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2000
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Journal Article: Asymptotic Arbitrage and the APT with or without Measure-Theoretic Structures (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:pariem:2000.81

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