The amendment and empirical test of arbitrage pricing models

The classical APT model is of the form r j - E(r j) = beta j(I - EI) + epsilon j, where r j - E(r j) is the earning deviation (called basic ariance-profit) of the security j, I is a common factor. This paper considers the impact on the securities return caused by the skewness and kurtosis of the stock returns distributions, and poses a re-modified the arbitrage pricing model as follows r j = E(r j) + beta j(I - EI) + theta j(I - EI) 2 + lambda j(I - EI) 3 + delta j (I - EI) 4 + epsilon j Based on the regression analysis method, and the fitting degree, one can arrive at this re-modified model has a more reasonable explanation level for securities pricing. -- arbitrage pricing models ; skewness ; Kurtosis ; empirical analysis