Asset Pricing with Spatial Interaction

We propose a spatial capital asset pricing model and a spatial arbitrage pricing theory (S-APT) that extend the classical asset pricing models by incorporating spatial interaction. We then apply the S-APT to study the comovements of eurozone stock indices (by extending the Fama–French factor model to regional stock indices) and the futures contracts on S&P/Case–Shiller Home Price Indices; in both cases, spatial interaction is significant and plays an important role in explaining cross-sectional correlation. The e-companion is available at https://doi.org/10.1287/mnsc.2016.2627 . This paper was accepted by Neng Wang, finance.

• 저널Management Science · 64(5) · 2083–2101
• 토픽Housing Market and Economics · Economics and Econometrics
• DOI10.1287/mnsc.2016.2627
• 저자Steven Kou, Xianhua Peng, Haowen Zhong