TY  - JOUR
AU  - Rothschild,Michael
TI  - Asset Pricing Theories
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 44
PY  - 1985
Y2  - March 1985
UR  - http://www.nber.org/papers/t0044
L1  - http://www.nber.org/papers/t0044.pdf
N1  - Author contact info:
Michael Rothschild
531 14th Street
Santa Monica, CA 90402
Tel: 310-394-6010
Fax: 310-593-4401
E-Mail: mrothsch@princeton.edu
AB  - This article compares two leading models of asset pricing: the capital asset pricing model (CAPM) and the arbitrage pricing theory (APT): I argue that while the APT is compatible with the data available for testing theories of asset pricing, the CAPM is not. In reaching this conclusion emphasis is placed on the distinction between the unconditional (relatively incomplete) information which econometricians must use to estimate asset pricing models and the conditional (complete) information which investors use in making the portfolio decisions which determine asset prices. Empirical work to date suggests that it is unlikely that the APT will produce a simple equation which explains differences in risk premium well with a few parameters. If the CAPM were correct, it would provide such an equation.
ER  -