Nardari, Federico; Scruggs, John T. - In: Journal of Financial and Quantitative Analysis 42 (2007) 04, pp. 857-891
We analyze a new class of linear factor models in which the factors are latent and the covariance matrix of excess returns follows a multivariate stochastic volatility process. We evaluate cross-sectional restrictions suggested by the arbitrage pricing theory (APT), compare competing stochastic...