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The Interdependent Structure of Security Returns

Published online by Cambridge University Press:  19 October 2009

Michael A. Simkowitz  and
Dennis E. Logue
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Extract

In this paper the traditional capital asset pricing model is reformulated as a system of simultaneous equations in which returns on similar securities are treated as endogenous variables and in which pertinent financial data for particular firms and a market factor are treated as exogenous variables. Such a system is estimated, and serious questions are raised concerning the tenability of the simple linear model so often used to explain capital asset prices under uncertainty.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 2 , March 1973 , pp. 259 - 272
Copyright
Copyright © School of Business Administration, University of Washington 1973

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