Arbitrage Pricing Theory and its Empirical Applicability for the
Helsinki Stock Exchange
Paavo Yli-Olli and Ilkka Virtanen
Abstract
The purpose of this paper is to test the Arbitrage Pricing Theory (APT) using
monthly data for Finnish stock returns during the 1970-1986 period. The first
stage involves estimating the systematic risk 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. The third stage involves testing the
implications of the APT using cross-sectional regression analysis.
(European Institute for Advanced Studies in Management (EIASM). Working
Paper 7-1989, 31 p.)