An Intertemporal Equilibrium Beta Pricing Model

Gregory Connor; Robert A. Korajczyk

doi:10.1093/rfs/2.3.373

An Intertemporal Equilibrium Beta Pricing Model

Gregory Connor^1,2; Robert A. Korajczyk^3,4

¹ London School of Economics and Political Science · ² University of California, Berkeley · ³ Northwestern University · ⁴ Kellogg's (Canada)

Review of Financial Studies 1989

This article develops an intertemporal, discrete-time, competitive equilibrium version of the arbitrage pricing theory (APT) and explores the econometric implications of this model under various restrictions on investor preferences and on the dynamic behavior of dividends. We describe conditions under which the econometric techniques typically used for estimating and testing the APT can be shown to be consistent with our economic model. We relate our intertemporal version of the APT to the static APT and to Merton’s intertemporal capital asset pricing model.

DOI: 10.1093/rfs/2.3.373
Volume: 2 (3)
Pages: 373-392
Language: en
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