Dow Jones commponents and economic indicators : a factor analysis approach
Dow Jones commponents and economic indicators : a factor analysis approach
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2005
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Assumption University
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eng
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Assumption University. Martin de Tours School of Management and Economics
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AU Journal of Management 3, 2 (June-December 2005), 20-29
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Abstract
This paper explores the relationships between economic indicators and movements in the Dow
components returns. There have been numerous attempts to identify these relationships: the Arbitrage
Pricing Theory (APT), one of these approaches, contributes directly to the mult(factor model. The
theory, introduced by Ross in 19 7 6, has been a valuable approach to analyzing security returns because
the APT allows analysts to study the effects of multiple influential factors . Factor analysis is then used
to analyze these factors, a group of economic indicators, and a group of security returns. Factor analysis
identifies a new set of uncorrelated variables for economic indicators, and another new set of uncorrelated
variables for stock returns. This study provides additional support to the idea that the returns on securities
are influenced both by the market, and by economic conditions.
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In English ; only abstract in English.
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