Article1984

Arbitrage Pricing Theory and Utility Stock Returns

Dorothy H. Bower · Richard S. Bower · Dennis E. Logue

111 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Financial Risk and Volatility Modeling

Abstract

ABSTRACT This paper presents some new evidence that Arbitrage Pricing Theory may lead to different and better estimates of expected return than the Capital Asset Pricing Model, particularly in the case of utility stock returns. Results for monthly portfolio returns for 1971–1979 lead to the conclusion that regulators should not adopt the single‐factor risk approach of the CAPM as the principal measure of risk, but give greater weight to APT, whose multiple factors provide a better indication of asset risk and a better estimate of expected return.

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References

1976The arbitrage theory of capital asset pricing 1980An Empirical Investigation of the Arbitrage Pricing Theory 1967Applied Economic Forecasting 1983Some Empirical Tests of the Theory of Arbitrage Pricing 1984A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory 1982The Arbitrage Pricing Theory: Is it Testable?1977Risk and return in finance 1984Some Results in the Theory of Arbitrage Pricing

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