A Test of the Cross-Sectional Robustness of the Arbitrage Pricing Model Using Foreign Exchange Rates*

This paper tests the cross-sectional robustness of the arbitrage pricing theory (APT) model using foreign exchange rate data to determine if the model is robust with respect to the various random samples and various factor analytic techniques. Factor scores are developed using various samples and factor analytic techniques to explain the returns for other samples and groupings. The APT model is found to be robust across samples and techniques.