Interpreting the factor risk premia in the arbitrage pricing theory
type: Item
instance of: scholarly article
title: Interpreting the factor risk premia in the arbitrage pricing theory
zbMATH Open document ID: 0555.90016
DOI: 10.1016/0022-0531(85)90071-7
author: Anat R. Admati
author: Paul Pfleiderer
published in: Journal of Economic Theory
publication date: 1985-01-01T00:00:00Z
review text: In the arbitrage pricing theory of \textit{S. A. Ross} [ibid. 13, 129-176 (1976)], assets' expected returns are shown to be approximately linear in the factor loadings of the process generating returns. This note provides a very simple and direct proof of the proposition that the coefficients in this approximate pricing relation can be interpreted as the excess returns on portfolios perfectly correlated with the factors whenever a riskless asset and such ''mimicking'' portfolios exist.
Mathematics Subject Classification ID: 91B24
Mathematics Subject Classification ID: 91B28
zbMATH DE Number: 3885595
zbMATH Keywords: arbitrage pricing theory
zbMATH Keywords: approximate pricing relation
zbMATH Keywords: excess returns on portfolios
MaRDI profile type: Publication
full work available at URL: 0022-0531(85)90071-7
OpenAlex ID: W1981252814
cites work: Funds, Factors, and Diversification in Arbitrage Pricing Models
cites work: Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets
cites work: A unified beta pricing theory
cites work: A simple approach to arbitrage pricing theory
description: scientific article; zbMATH DE number 3885595