Positive alphas and a generalized multiple-factor asset pricing model

摘要

This paper derives a generalized multiple-factor asset pricing model using only the assumptions of the existence of an equivalent martingale measure, frictionless, and competitive markets. As such, all existing multiple-factor asset pricing models, including the intertermporal CAPM and Ross' APT, are special cases of this formulation. First, similar to the standard models, a traded asset's expected return is linear in a finite number of traded risk-factor returns. Different from standard models, however, this model allows potentially an infinite number of distinct risk-factors in the economy. Different assets will, in general, depend on a different finite set of risk-factors. Second, positive alphas imply arbitrage opportunities or the existence of dominated securities, and not just abnormal expected returns. This generalization is consistent with many of the observed discrepancies between existing multiple-factor asset pricing models and the empirical evidence.