Arbitrage Pricing Theory: A study on the Stockholm Stock

Abstract

This thesis investigates the macroeconomic factors that affect the returns on the different portfolios in Stockholm Stock Exchange by using Arbitrage Pricing Theory (Stephen Ross 1976). We use the portfolios of Large Cap, Mid Cap, Small Cap, and All Caps. Specifically, multiple index model is used. The sample period is 2012-2017. Our regression results show that ten out of the twelve macroeconomic factors are significant for at least 10% significance level in on of the portfolios. The regression results show that the same factors that was significant in the Japanese market in the Japanese study made by Azeez and Yonezawa (2004) are also significant for the Stockholm Stock Exchange.