【中山大学431金融 投资学】Chap011.pdf

Single Factor Model • Returns on a security come from two sources • Common macro-economic factor • Firm specific events • Possible common macro-economic factors • Gross Domestic Product Growth • Interest Rates Single Factor Model Equation Ri = E(ri) + Betai (F) + ei Ri = Return for security i Betai = Factor sensitivity or factor loading or factor beta F = Surprise in macro-economic factor (F could be positive, negative or zero) ei = Firm specific events Multifactor Models • Use more than one factor in addition to market return • Examples include gross domestic product, expected inflation, interest rates etc. • Estimate a beta or factor loading for each factor using multiple regression. Multifactor Model Equation Ri = E(ri) + BetaGDP (GDP) + BetaIR (IR) + ei Ri = Return for security i BetaGDP= Factor sensitivity for GDP BetaIR = Factor sensitivity for Interest Rate ei = Firm specific events Multifactor SML Models E(r) = rf + BGDPRPGDP + BIRRPIR BGDP = Factor sensitivity for GDP RPGDP = Risk premium for GDP BIR = Factor sensitivity for Interest Rate RPIR = Risk premium for GDP Arbitrage Pricing Theory •Arbitrage - arises if an investor can construct a zero investment portfolio with a sure profit. •Since no investment is required, an investor can create large positions to secure large levels of profit. •In efficient markets, profitable arbitrage opportunities will quickly disappear. APT Well-Diversified Portfolios rP = E (rP) + bPF + eP F = some factor For a well-diversified portfolio: eP approaches zero Similar to CAPM Portfolios and Individual Security E(r)% E(r)% F F Individual Security Portfolio Disequilibrium Example E(r)% 10