364
Views
4
CrossRef citations to date
0
Altmetric
Original Articles

Bayesian analysis of the factor model with finance applications

, &
Pages 343-356 | Received 30 Mar 2004, Accepted 13 Sep 2006, Published online: 19 Jun 2007

References

  • Bai , J and Ng , S . 2002 . Determining the number of factors in approximate factor model . Econometrica , 70 : 191 – 221 .
  • Bakes , K , Metrick , PA and Wachter , J . 2001 . Should investor avoid all actively managed funds? A study in Bayesian performance evaluation . J. Finance , 56 : 45 – 84 .
  • Broemeling , LD . 1985 . Bayesian Analysis of Linear Models , New York : Marcel Dekker Inc .
  • Brown , SJ . 1989 . The number of factors in security returns . J. Finance , 44 : 1247 – 1262 .
  • Brown , SJ and Weinstein , MI . 1983 . A new approach to testing asset pricing models: the bilinear paradigm . J. Finance , 38 : 711 – 743 .
  • Carlin , BP , Louis and Bayes , TA . 1996 . Empirical Bayes Method for Data Analysis , London : Chapman and Hall .
  • Chan , LKC , Karceski , J and Lakonishok , J . 1998 . The risk and return from factors. . J. Financ. Quant. Anal. , 33 : 159 – 188 .
  • Chen , NF . 1983 . Some empirical tests of the theory of arbitrage pricing. . J. Finance , 38 : 1393 – 1414 .
  • Chib , S . 1995 . Marginal likelihood from the Gibbs output . J. Am. Stat. Assoc , 90 : 1313 – 1321 .
  • Connor , G and Korajczyk , RA . 1993 . A test for the number of factors in an approximate factor model . J. Finance , 48 : 1263 – 1291 .
  • Dhrymes , P , Friend , I and Gultekin , N . 1984 . A critical examination of the empirical evidence on the arbitrage pricing theory . J. Finance , 39 : 323 – 347 .
  • DiCiccio , TJ , Kass , RE , Raftery , A and Wasserman , L . 1997 . Computing Bayes factors by combining simulation and asymptotic approximations . J. Am. Stat. Assoc. , 92 : 903 – 915 .
  • Douglas , GW . 1969 . Risk in equity market: an empirical appraisal of market efficiency . Yale Econ. Essay , 9 : 3 – 45 .
  • Fama , EF . 1976 . Foundations of Finance , New York : Basic Books .
  • Fama , EF and French , KR . 1993 . Common risk factors in the returns on stocks and bonds . J. Financ. Econ. , 33 : 3 – 56 .
  • Fama , EF and French , KR . 1996 . Multifactor explanations of asset pricing anomalies . J. Finance , 51 : 55 – 84 .
  • Fama , EF and Macbeth , J . 1973 . Risk, return and equilibrium: empirical tests . J. Polit. Econ. , 81 : 607 – 636 .
  • Gelman , A . 1996 . “ Inference and monitoring convergence ” . In InMarkov Chain Monte Carlo in Practice , Edited by: Gilks , WR , Richardson , S and Spiegelhalter , DJ . 131 – 144 . London : Chapman & Hall .
  • Gelman , A and Meng , XL . 1998 . Simulating normalizing constants: from importance sampling to bridge sampling to path sampling . Stat. Sin , 13 : 163 – 185 .
  • Gelman , A , Meng , XL and Stern , H . 1996 . Posterior predictive assessment of model fitness via realized discrepancies . Stat. Sin. , 6 : 733 – 807 .
  • Geman , S and Geman , D . 1984 . Stochastic relaxation, Gibbs distribution, and the Bayesian restoration of images . IEEE Trans. Pattern Anal. Machine Intelligence , 6 : 721 – 741 .
  • Geweke , J and Zhou , G . 1996 . Measuring the pricing error of the arbitrage pricing theory . Rev. Financ. Stud. , 9 : 557 – 587 .
  • Geyer , CJ . 1992 . Practical Markov chain Monte Carlo . Stat. Sci. , 7 : 473 – 511 .
  • Harvey , CR and Zhou , G . 1990 . Bayesian inference in asset pricing tests . J. Financ. Econ. , 26 : 221 – 254 .
  • Huberman , G , Kandel , S and Stambaugh , RF . 1987 . Mimicking portfolios and exact arbitrage pricing . J. Finance , 42 : 1 – 9 .
  • Kandel , S , McCulloch , R and Stambaugh , RF . 1995 . Bayesian inference and portfolio efficiency . Rev. Financ. Stud. , 8 : 1 – 53 .
  • Kass , RE and Raftery , AE . 1995 . Bayes factors . sJ. Am. Stat. Assoc. , 90 : 773 – 795 .
  • Knez , PJ , Litterman , R and Scheinkman , J . 1994 . Explorations into factors explaining money market returns . J. Finance , 49 : 1861 – 1882 .
  • Lawley , DN and Maxwell , AE . 1971 . Factor Analysis as a Statistical Method , 2 , London : Butterworths .
  • Lee , SY and Shi , JQ . 2000 . Joint Bayesian analysis of factor scores and structural parameters in the factor analysis model . Ann. Inst. Stat. Math. , 52 : 722 – 736 .
  • Lee , SY and Song , XY . 2003 . Estimation and model comparison for a nonlinear latent variable model with fixed covariates . Psychometrika , 68 : 27 – 47 .
  • Lee , SY and Song , XY . 2003b . Bayesian analysis of structural equation models with dichotomous variables. . Stat. Med. , 22 : 3073 – 3088 .
  • Lee , SY and Zhu , HT . 2000 . Statistical analysis of nonlinear structural equation models with continuous and polytomous data.Br . J. Math. Stat. Psychol. , 53 : 209 – 232 .
  • Lewellen , J and Shanken , J . 2002 . Learning, asset-pricing tests, and market efficiency . J. Finance , 57 : 1113 – 1145 .
  • Lindley , DV and Smith , AFM . 1972 . Bayes estimates for the linear model (with discussion) . J. R. Stat. Soc. Ser. B , 34 : 1 – 42 .
  • Lintner , J . 1965 . The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets . sRev. Econ. Stat. , 47 : 13 – 37 .
  • Markowitz , H . 1959 . “ Portfolio Selection ” . In Efficient Diversification of Investments , New York : Wiley .
  • McCulloch , R and Rossi , PE . 1990 . Posterior, predictive, and utility-based approaches to testing the arbitrage pricing theory . J. Financ. Econ. , 28 : 7 – 38 .
  • McCulloch , R and Rossi , PE . 1991 . A bayesian approach to testing the arbitrage pricing theory . J. Econometrics , 49 : 141 – 168 .
  • Meng , XL . 1994 . Posterior predictivep-values . Ann. Stat. , 22 : 1142 – 1160 .
  • Miller , MH and Scholes , MS . 1972 . “ Rates of return in relation to risk: a re-examination of some recent findings ” . In InStudies in the Theory of Capital Markets , Edited by: Jensen , MC . New York : Praeger .
  • Mossin , J . 1966 . Equilibrium in a capital asset market . Econometrika , 34 : 768 – 783 .
  • Pástor , L . 2000 . Portfolio selection and asset pricing models . J. Finance , 55 : 179 – 223 .
  • Perry , P . 1982 . The time variance relationship of security returns: implications for the return-generating stochastic prices . J. Finance , 37 : 857 – 869 .
  • Raftery , AE . 1996 . “ Hypothesis testing and model selection ” . In InPractical Markov Chain Monte Carlo , Edited by: Wilks , WR , Richardson , S and Spieglhalter , DJ . 163 – 188 . London : Chapman and Hall .
  • Roll , R and Ross , SA . 1980 . An empirical investigation of the arbitrage pricing theory . J. Finance , 35 : 1073 – 1110 .
  • Ross , SA . 1976 . The arbitrage theory of capital asset pricing . J. Econ. Theory , 13 : 341 – 360 .
  • Rubin , DB . 1984 . Bayesianly justifiable and relevant frequency calculations for the applied statistician . Ann. Stat. , 12 : 1151 – 1172 .
  • Shanken , J . 1987 . A bayesian approach to testing portfolio efficiency . J. Financ. Econ. , 19 : 195 – 215 .
  • Sharpe , WF . 1963 . A simplified model for portfolio selection . Manag. Sci. , 9 : 277 – 293 .
  • Sharpe , WF . 1964 . Capital asset prices: a theory of market equilibrium under conditions of risk . J. Finance , 19 : 425 – 442 .
  • Shukla , R and Trzcinka , C . 1990 . Sequential tests of the arbitrage pricing theory: a comparison of principal components and maximum likelihood factors . J. Finance , 45 : 1541 – 1564 .
  • Song , XY and Lee , SY . 2001 . Bayesian estimation and test for factor analysis model with continuous and polytomous data in several populations.Br . Math. Stat. Psychol , 54 : 237 – 263 .
  • Song , XY and Lee , SY . 2004 . Bayesian analysis of two-level nonlinear structural equation models with continuous and polytomous data.Br . J. Math. Stat. Psychol , 57 : 29 – 52 .
  • Spiegelhalter , DJ and Smith , AFM . 1982 . Bayes factor for linear and log-linear models with vague prior information . J. R. Stat. Soc. Ser. B , 44 : 377 – 387 .
  • Tanner , MA and Wong , WH . 1987 . The calculation of posterior distributions by data augmentation (with discussion) . J. Am. Stat. Assoc. , 82 : 528 – 550 .
  • Trzcinka , C . 1986 . On the number of factors in the arbitrage pricing model. . J. Finance , 41 : 347 – 368 .
  • Wei , KCJ . 1988 . An asset-pricing theory unifying the CAPM and APT . J. Finance , 43 : 881 – 892 .

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.