how do I run APT model on Eviews?

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thandeka
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Joined: Tue Jun 25, 2024 1:20 am

how do I run APT model on Eviews?

Postby thandeka » Wed Jun 26, 2024 6:03 am

Hi,

How do I run an Arbitrage Pricing Model, Broadly, the test proceeds as follows:

1. I have to estimate the betas from the factor model, which is a make up of 8 macroeconomic variables which is a time series equation.

2. Thereafter, from the betas found in the first equation, I have to estimate the lambdas, which is a cross-sectional regression.

This is a two-step estimation. I think I need to write a code to estimate both betas and lambdas to avoid errors-in-variables. Any idea on how I can do this?

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