Barone-Adesi (1985) and Barone-Adesi et al. (2004) (henceforth referred to as BA and BAGU, respectively) recast the covariance-co-skewness CAPM as the APT restriction on the system of quadratic market model

for which the multivariate methodology of Gibbons (1982) is readily applicable. eir testing approach avoids the errors-in-variables and multicollinearity problems of utility-based asset pricing and makes better use of available information by employing the contemporaneous covariance among the asset returns in a multivariate setting. is approach of APT testing is also effi cient. BA and BAGU approach uses the information on the return on the stocks and the market portfolio only thereby being less dependent on external macroeconomic data unlike the prespecifi ed macroeconomic approach of APT testing such as Chen et al. (1986). Relevance of co-moments of order greater than 2 and their likely impact on expected returns are known to be diff erent in emerging and developed markets. For example, Aggarwal et al. (1999) observe that generally the skewness in the return distribution is positive for emerging market indices and negative for developed markets. Non-normality of returns is an important consideration when modeling emerging market returns as their microstructure and relatively turbulent political and economic environment make the normality assumption diffi cult to justify.