Munich Personal RePEc Archive

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

FARUQUE, MUHAMMAD U (2011): An empirical investigation of the arbitrage pricing theory in a frontier stock market: evidence from Bangladesh. Published in: Indian Journal of Economics and Business , Vol. 10, No. 04 (1. December 2011): pp. 443-465.

[img]
Preview
PDF
MPRA_paper_38675.pdf

Download (358kB) | Preview

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.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.