A Simple Approach to Arbitrage Pricing Theory

Graduate School of Business, University of Chicago, Chicago, Illinois 60637, USA

This is a modified version of the third chapter in my Ph.D. dissertation which was written at Yale University. I am grateful to Gregory Connor, who inspired some of the ideas in the paper. Comments from my advisor, Steve Ross, as well as from Jon Ingersoll, Uriel Rothblum and Michael Rothschild were helpful in my attempts to bring this work to a lucid form. This research was supported by NSF Grants ENG-78-25182 and SOC-77-22301.