Location of Repository

An empirical investigation of the arbitrage pricing theory in a frontier stock market: evidence from Bangladesh

By MUHAMMAD U FARUQUE

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.

Topics: 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
Year: 2011
OAI identifier: oai:mpra.ub.uni-muenchen.de:38675

Suggested articles

Preview


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.