The analysis of the arbitrage pricing model on the stock return: a case of Athens stock market

Abstract

The purpose of this study is twofold. First to verify the arbitrage-pricing model (APM) and second to examine if the APM model is valid for the Greek capital market. We examined the 31 companies listed on the Athens stock exchange (ASE) with the highest market capitalisation. We collected data on a monthly basis for a period from January 2009 to December 2014. The APM model estimates that the macro-economic factors influence the Athens stock return. Our model is tested by performing principal factor and regression analysis. The principal factor analysis identifies the macro-economic factors, which will be used in the regression analysis. The regression analysis indicates the macro-economic factors influence on the expected stock return. The finding of the study is that the APM model is invalid for the ASE market.