Aspects of the Factor Structure Implicit in the Australian Industrial Equity Market: February 1958 to August 1977

Several asset pricing models have been developed in the literature, all of which can be treated as special theoretical cases of the Arbitrage Pricing Theory (APT). This paper examines aspects of the factor structure implicit in securities' monthly return data. Part of the approach is directly analogous to an examination of market model beta stationarity. It is found that a single factor, typically identified as a market factor, is dominant and remains intertemporally stable. Ceteris paribus, the implicit factor structure is consistent with a one factor APT of which the mean-variance CAPM is a special case.