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Determinants of expected stock returns: Large sample evidence from the German market

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  • Artmann, Sabine
  • Finter, Philipp
  • Kempf, Alexander

Abstract

This paper conducts a comprehensive asset pricing study based on a unique dataset for the German stock market. For the period 1963 to 2006 we show that value characteristics and momentum explain the cross-section of stock returns. Corresponding factor portfolios have significant premiums across various double-sorted characteristic-based test assets. In a horse race of competing asset pricing models the Fama-French 3-factor model does a poor job in explaining average stock returns. The Carhart 4-factor model performs much better, but a 4-factor model containing an earnings-to-price factor instead of a size factor does even slightly better.

Suggested Citation

  • Artmann, Sabine & Finter, Philipp & Kempf, Alexander, 2011. "Determinants of expected stock returns: Large sample evidence from the German market," CFR Working Papers 10-01 [rev.], University of Cologne, Centre for Financial Research (CFR).
    • Handle: RePEc:zbw:cfrwps:1001r
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    References listed on IDEAS

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    2. Muinde Patrick Mumo, 2017. "The Determinants of Stock Returns in the Emerging Market of Kenya: An Empirical Evidence," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(9), pages 8-21, September.

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    More about this item

    Keywords

    asset pricing; characteristics; risk factors; multifactor models; Germany;
    All these keywords.

    JEL classification:

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

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