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Estimating Pervasive Factors with Missing Observations, Research Program in Finance. Working Paper. No. 173

Abstract

We suggest a technique for estimating pervasive economic factors which allows the use of all available security return data. The resulting factor estimates can be used in applications and tests of the Arbitrage Pricing Theory (APT). An obvious advantage of the technique is that more precise estimates of the factors are obtained while avoiding potential survivorship biases in factor construction. Empirically, the factor estimates using the entire data set outperform (in terms of asset pricing) estimates using only continuously traded assets.

Type

Working Paper

Author(s)

Gregory Connor, Robert Korajczyk

Date Published

1987

Citations

Connor, Gregory, and Robert Korajczyk. 1987. Estimating Pervasive Factors with Missing Observations. Research Program in Finance. Working Paper. No. 173.

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