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Intermediate Financial Theory, 3rd Edition by John B. Donaldson, Jean-Pierre Danthine

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Chapter 14

The Arbitrage Pricing Theory

Chapter 14 introduces the concept of a factor model of security return determination, and the attendant Arbitrage Pricing Theory. The chapter has an applied orientation with special emphasis on the construction of factor mimicking portfolios.

Keywords

arbitrage pricing theory; market model; pure factor portfolio; momentum factor; SMB factor; HML factor

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