Arbitrage Pricing Theory and Multifactor Models of Risk and Return参考.ppt

INVESTMENTS | BODIE, KANE, MARCUS INVESTMENTS | BODIE, KANE, MARCUS Copyright ? 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return 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 = Return on security βi= Factor sensitivity or factor loading or factor beta F = Surprise in macro-economic factor (F could be positive or negative but has expected value of zero) ei = Firm specific events (zero expected value) 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 = Return for security i βGDP = Factor sensitivity for GDP βIR = Factor sensitivity for Interest Rate ei = Firm specific events Multifactor SML Models GDP = Factor sensitivity for GDP RPGDP = Risk premium for GDP IR = Factor sensitivity for Interest Rate RPIR = Risk premium for Interest Rate Interpretation The expected return on a security is the sum of: The risk-free rate The sensitivity to GDP times the risk premium for bearing GDP risk The sensitivity to interest rate risk times the risk premium for bearing interest rate risk Arbitrage Pricing Theory Arbitrage occurs if there is a zero investment portfolio with a sure profit. Since no investment is required, investors can create large positions to obtain large profits. Arbitrage Pricing Theory Regardless of wealth or risk aversion, investors will want an infinite position in the risk-free arbitrage portfolio. In efficient markets, profitable arbitrage opportunities will quickly disappear. APT Well-Diversified Portfolios rP = E (rP) +