An empirical investigation of the arbitrage pricing theory in a frontier stock market: evidence from Bangladesh
Abstract
Although the existing literature of Arbitrage Pricing Theory (APT) on different categories of stock markets is vast, it is non-existent in the case of frontier stock markets (defined as very small capital markets). This paper fills this gap by investigating how APT performs in a frontier stock market. To address the common problem of multi-collinearity in macro variables, this study uses principal component analysis (PCA) as a robustness check on the previous results. The results confirm evidence of one significant macroeconomic factor in the Dhaka stock market - a frontier stock market of Bangladesh. This result is comparable to that of some emerging (larger than frontier markets) stock markets- MPRA Paper
- NonPeerReviewed
- G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates
- G11 - Portfolio Choice ; Investment Decisions
- G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
- G10 - General
- G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies