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The formulation of the four factor model when a considerable proportion of firms is dual-listed

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  • Garyn-Tal, Sharon
  • Lauterbach, Beni

Abstract

We examine the performance of the Fama–French–Carhart four factor asset pricing model in an economy, Israel, where a relatively large proportion of shares (14.4% in our sample) are dually listed, i.e., trade also on NYSE or NASDAQ. We find that a hybrid model (adding U.S. or global factors to the local 4 factor model) performs only slightly better than the local model, casting doubt on the practical necessity of hybrid models in emerging markets. Further tests suggest that the dually listed shares should not be excluded when constructing the local factors.

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  • Garyn-Tal, Sharon & Lauterbach, Beni, 2015. "The formulation of the four factor model when a considerable proportion of firms is dual-listed," Emerging Markets Review, Elsevier, vol. 24(C), pages 1-12.
    • Handle: RePEc:eee:ememar:v:24:y:2015:i:c:p:1-12
    DOI: 10.1016/j.ememar.2015.05.006
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    2. Lehrer, Nimrod David, 2018. "The value of political connections in a multiparty parliamentary democracy: Evidence from the 2015 elections in Israel," European Journal of Political Economy, Elsevier, vol. 53(C), pages 13-58.
    3. Muhammad Adnan Arshad & Saira Munir & Bashir Ahmad & Muhammad Waseem, 2019. "Do factors matter for predicting high-risk stock returns? Comparison of single-, three- and five-factor CAPM," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-16, June.
    4. Mohammad K. Elshqirat & Mohammad M. Sharifzadeh, 2018. "Testing a Multi-factor Capital Asset Pricing Model in the Jordanian Stock Market," International Business Research, Canadian Center of Science and Education, vol. 11(9), pages 13-22, September.

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    More about this item

    Keywords

    Local and hybrid four factor models; Dually-listed shares; Fama–French–Carhart model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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