No Arbitrage and Arbitrage Pricing: A New Approach
Publication
, Journal Article
BANSAL, R; VISWANATHAN, S
Published in: The Journal of Finance
January 1, 1993
We argue that arbitrage‐pricing theories (APT) imply the existence of a low‐dimensional nonnegative nonlinear pricing kernel. In contrast to standard constructs of the APT, we do not assume a linear factor structure on the payoffs. This allows us to price both primitive and derivative securities. Semi‐nonparametric techniques are used to estimate the pricing kernel and test the theory. Empirical results using size‐based portfolio returns and yields on bonds reject the nested capital asset‐pricing model and linear APT and support the nonlinear APT. Diagnostics show that the nonlinear model is more capable of explaining variations in small firm returns. 1993 The American Finance Association
Duke Scholars
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Published In
The Journal of Finance
DOI
EISSN
1540-6261
ISSN
0022-1082
Publication Date
January 1, 1993
Volume
48
Issue
4
Start / End Page
1231 / 1262
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
Citation
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Chicago
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BANSAL, R., & VISWANATHAN, S. (1993). No Arbitrage and Arbitrage Pricing: A New Approach. The Journal of Finance, 48(4), 1231–1262. https://doi.org/10.1111/j.1540-6261.1993.tb04753.x
BANSAL, R., and S. VISWANATHAN. “No Arbitrage and Arbitrage Pricing: A New Approach.” The Journal of Finance 48, no. 4 (January 1, 1993): 1231–62. https://doi.org/10.1111/j.1540-6261.1993.tb04753.x.
BANSAL R, VISWANATHAN S. No Arbitrage and Arbitrage Pricing: A New Approach. The Journal of Finance. 1993 Jan 1;48(4):1231–62.
BANSAL, R., and S. VISWANATHAN. “No Arbitrage and Arbitrage Pricing: A New Approach.” The Journal of Finance, vol. 48, no. 4, Jan. 1993, pp. 1231–62. Scopus, doi:10.1111/j.1540-6261.1993.tb04753.x.
BANSAL R, VISWANATHAN S. No Arbitrage and Arbitrage Pricing: A New Approach. The Journal of Finance. 1993 Jan 1;48(4):1231–1262.
Published In
The Journal of Finance
DOI
EISSN
1540-6261
ISSN
0022-1082
Publication Date
January 1, 1993
Volume
48
Issue
4
Start / End Page
1231 / 1262
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment