On the Long-Term Stability and Cross-Country Similarity of the Factor
Patterns in the Arbitrage Pricing Model
Paavo Yli-Olli, Ilkka Virtanen and Teppo Martikainen
Abstract
The purpose of this paper is to test the Arbitrage Pricing Theory (APT) using
monthly data for Finnish and Swedish stock returns during the 1977-1986
period. The first stage involves estimating the systematic risk components for
each asset using factor analysis. The second stage involves testing by
transformation analysis if the number and structure of factors which influence
the security returns remain unchanged across various time periods and across
different samples in two Scandinavian countries.
(Proceedings of the University of Vaasa, Research Papers No. 142 (1989),
38 p.)