TY - JOUR
T1 - Sequential Tests of the Arbitrage Pricing Theory
T2 - A Comparison of Principal Components and Maximum Likelihood Factors
AU - SHUKLA, RAVI
AU - TRZCINKA, CHARLES
PY - 1990/12
Y1 - 1990/12
N2 - We examine the cross‐sectional pricing equation of the APT using the elements of eigenvectors and the maximum likelihood factor loadings of the covariance matrix of returns as measures of risk. The results indicate that, for data assumed stationary over twenty years, the first vector is a surprisingly good measure of risk when compared with either a one‐ or a five‐factor model or a five‐vector model. We conclude that in some circumstances principal components analysis may be preferred to factor analysis. 1990 The American Finance Association
AB - We examine the cross‐sectional pricing equation of the APT using the elements of eigenvectors and the maximum likelihood factor loadings of the covariance matrix of returns as measures of risk. The results indicate that, for data assumed stationary over twenty years, the first vector is a surprisingly good measure of risk when compared with either a one‐ or a five‐factor model or a five‐vector model. We conclude that in some circumstances principal components analysis may be preferred to factor analysis. 1990 The American Finance Association
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U2 - 10.1111/j.1540-6261.1990.tb03727.x
DO - 10.1111/j.1540-6261.1990.tb03727.x
M3 - Article
AN - SCOPUS:0001537228
SN - 0022-1082
VL - 45
SP - 1541
EP - 1564
JO - The Journal of Finance
JF - The Journal of Finance
IS - 5
ER -