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Industry Effects and Multivariate Stock Price Behavior

Published online by Cambridge University Press:  19 October 2009

John W. Aber
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Extract

Models of return generation for securities are potentially important for a number of reasons, including their possible utility in normative portfolio construction. Multi-index models of the process are frequently suggested as an alternative to the familiar single-index models, but, while the multi-index models are intuitively appealing, their empirical superiority remains largely undemonstrated. This paper examines the extent to which three multi-index models succeed in eliminating dependence in the return residuals for a portfolio of common stocks. The relevance of this research lies in the promise that, while obviously requiring additional inputs to determine the efficient set of portfolios, multi-index models may succeed in identifying a more accurate set of efficient portfolios.

Type
X. Capital Asset Pricing
Information
Journal of Financial and Quantitative Analysis , Volume 11 , Issue 4 , November 1976 , pp. 617 - 624
Copyright
Copyright © School of Business Administration, University of Washington 1976

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References

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