Empirical Test of the Arbitrage Pricing Theory Based on the Downside Risk(D-APT) in the Tehran Stock Exchange

Arbitrage pricing theory presented by Ross is based on theory of the absence of arbitrage opportunities in financial market and its main condition is the existence of a linear relationship between the actual return and a set of common factors, In this model, asset pricing is based on risk, although the risk source is not just one factor and its not only the market portfolio, But several factors affect the assets which they are called risk factors. In most APT studies, the researchers test the model through using two scales of beta coefficient and variance. But, the experimental evidences indicate the inefficiency of mean-variance framework, which means that stock returns cant be described well by the mean and variance. In this study, in order to identify the inefficiency of variance (standard deviation), for the first time the new standards of semi-variance and downside Beta in form of APT Model called downside arbitrage pricing theory (D-APT) were used.