dc.contributor.author | Chamberlain, Gary | |
dc.contributor.author | Rothschild, Michael | |
dc.date.accessioned | 2009-09-02T18:48:43Z | |
dc.date.issued | 1982 | |
dc.identifier.citation | Chamberlain, Gary, and Michael J. Rothschild. 1982. Arbitrage, factor structure, and mean-variance analysis on large asset markets. NBER Working Paper 996. | en |
dc.identifier.issn | 0898-2937 | en |
dc.identifier.uri | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3230355 | |
dc.description.abstract | We examine the implications of arbitrage in a market with many assets. The absence of arbitrage opportunities implies that the linear functionals that give the mean and cost of a portfolio are continuous; hence there exist unique portfolios that represent these functionals. These portfolios span the mean-variance efficient set. We resolve the question of when a market with many assets permits so much diversification that risk-free investment opportunities are available. Ross 112, 141 showed that if there is a factor structure, then the mean returns are approximately linear functions of factor loadings. We define an <i>approximate factor structure</i> and show that this weaker restriction is sufficient for Ross' result. If the covariance matrix of the asset returns has only K unbounded eigenvalues, then there is an approximate factor structure and it is unique. The corresponding K eigenvectors converge and play the role of factor loadings. Hence only a principal component analysis is needed in empirical work. | en |
dc.description.sponsorship | Economics | en |
dc.language.iso | en_US | en |
dc.publisher | National Bureau of Economic Research | en |
dc.relation.isversionof | http://www.nber.org/papers/w0996 | en |
dash.license | LAA | |
dc.title | Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets | en |
dc.relation.journal | Working paper series (National Bureau of Economic Research) | en |
dash.depositing.author | Chamberlain, Gary | |
dc.date.available | 2009-09-02T18:48:43Z | |
dash.contributor.affiliated | Chamberlain, Gary | |