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Assessing the usefulness of daily and monthly asset‐pricing factors for Australian equities

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  • Philip Gray
  • Angel Zhong

Abstract

This paper considers which factors are worthy of inclusion in asset‐pricing models for Australian equity returns at daily and monthly frequencies. We utilise the recently developed methodology of Harvey and Liu (2020) to employ a performance metric specifically designed for model comparison and to conduct statistical inference that accommodates the possibility of data mining. The clear and consistent finding is that the market risk premium is the most important factor. This is the case for both daily and monthly asset‐pricing specifications, and irrespective of whether individual stocks or portfolios are used as test assets. There is no compelling evidence that any other factors are useful, implying that a parsimonious model suffices.

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  • Philip Gray & Angel Zhong, 2022. "Assessing the usefulness of daily and monthly asset‐pricing factors for Australian equities," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 181-211, March.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:1:p:181-211
    DOI: 10.1111/acfi.12786
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Xinyue & Bissoondoyal-Bheenick, Emawtee & Zhong, Angel, 2023. "Investor sentiment and stock market anomalies in Australia," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 284-303.

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