Particularly since the passage of ERISA, institutional investors have increasingly been willing to consider potential investments that traditionally have been considered highly speculative. Indeed, some institutional investors now routinely use options and futures, instruments that formerly were...

This paper provides new tests of the arbitrage pricing theory (APT). Test results appear to be extremely sensitive to the number of securities used in the two stages of the tests of the APT model. New tests also indicate that unique risk is fully as important as common risk. While these tests...