 An empirical investigation of the arbitrage pricing theory in a frontier stock market: evidence from BangladeshMuhammad U Faruque MPRA Paper from University Library of Munich, Germany Abstract: Although the existing literature of Arbitrage Pricing Theory (APT) on different categories of stock markets is vast, it is non-existent in the case of frontier stock markets (defined as very small capital markets). This paper fills this gap by investigating how APT performs in a frontier stock market. To address the common problem of multi-collinearity in macro variables, this study uses principal component analysis (PCA) as a robustness check on the previous results. The results confirm evidence of one significant macroeconomic factor in the Dhaka stock market - a frontier stock market of Bangladesh. This result is comparable to that of some emerging (larger than frontier markets) stock markets. Keywords: Key words: Arbitrage pricing theory (APT); Capital-asset pricing model; Dhaka stock exchange (DSE); Principal component analysis; Principal components (PC); Efficiency market hypothesis (EMH) and Chen; Roll and Ross (CRR) (search for similar items in EconPapers) Published in Indian Journal of Economics and Business 04.10(2011): pp. 443-465 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38675 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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