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Size and book-to-market factors in Australia

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Author Info

  • Tim Brailsford
  • Clive Gaunt

    (UQ Business School and Bond University, Australia)

  • Michael A O’Brien

    (Schroders Investment Management, Sydney, Australia)

Registered author(s):

    Abstract

    There is continuing debate in the asset-pricing literature as to the acceptance of the Fama–French three-factor model. While this model has received strong empirical support from tests in the US equity market, tests of the model in the Australian market have yielded inconclusive findings, particularly in respect of the high-minus-low factor. Prior research in Australia has suffered from limited datasets in respect of the accounting variables, and previous results vary with the scope of the dataset employed. Our study provides two advances. Firstly, the study utilizes a purpose-built dataset spanning 25 years and 98% of all listed firms. Secondly, the study employs a more appropriate portfolio construction method than that employed in prior studies. With these advances, the study is more able to test the three-factor model against the capital asset-pricing model (CAPM). The findings support the superiority of the Fama–French model, and for the first time align the research in this area between Australia and the USA.

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    File URL: http://aum.sagepub.com/content/37/2/261.abstract
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    Bibliographic Info

    Article provided by Australian School of Business in its journal Australian Journal of Management.

    Volume (Year): 37 (2012)
    Issue (Month): 2 (August)
    Pages: 261-281

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    Handle: RePEc:sae:ausman:v:37:y:2012:i:2:p:261-281

    Contact details of provider:
    Web page: http://www.agsm.edu.au

    Related research

    Keywords: asset pricing; book-to-market effect; capital asset-pricing model; Fama–French three-factor model; size effect;

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