The Number of Factors in Security Returns

  • Author(s): STEPHEN J. BROWN
  • Published: Apr 30, 2012
  • Pages: 1247-1262
  • DOI: 10.1111/j.1540-6261.1989.tb02652.x

ABSTRACT

Both factor analysis of security returns and the analysis of eigenvalues seem to indicate that a market factor explains the major part of security returns. We find that such evidence is consistent with an economy where there are in fact k “equally important” priced factors; eigenvalue analysis in the context of such an economy will lead an investigator to the false inference that the one important “factor” is the return on an equally weighted market index.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version