1. Arbitrage Pricing Theory
1.1 Intuition in General
1.2 Implementation of APT
Step 1: Identify factors;
Step 2: Estimate factor coefficient;
Step 3: Estimate factor premiums;
Step 4: Pricing.
1.3 Fama-French Three-factor Model
2. Application
2.1 Data Selection
2.2 Estimate APT using PCA
2.3 Estimate Fama-French Model