Explaining the Cross-Section of Returns via a Multi-Factor APT Model
用自回归方法检验时变风险溢价的多因子模型，发现该模型能捕捉规模效应和股息率效应，但无法解释账面市值比效应和盈利价格比效应，说明常数贝塔多因子模型不足以解释预期收益率的截面差异。
This paper uses an autoregressive approach to test a multi-factor model with time-varying risk premiums. A quasi-differencing approach is used to eliminate the unobservable factors in the model. It is found that the model is capable of capturing the “size effect” and the “dividend yield effect,” but is incapable of explaining the “book-to-market effect” and the “earnings-price ratio effect.” Thus, it is concluded that a constant-beta multi-factor model will not be able to explain the cross-sectional variation in expected returns.