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Anomalies and stock returns: Australian evidence

Author

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  • Philip Gharghori
  • Ronald Lee
  • Madhu Veeraraghavan

Abstract

Prior research has identified the existence of several cross‐sectional patterns in equity returns, commonly referred to as effects. This paper tests for the existence of a number of well‐known effects using data from the Australian equities market. Specifically, we investigate the size effect, book‐to‐market effect, earnings‐to‐price effect, cashflow‐to‐price effect, leverage effect and the liquidity effect. An additional aim of this paper is to investigate the capability of the Fama–French model in explaining any observed effects. We document a size, book‐to‐market, earnings‐to‐price and cashflow‐to‐price effect but fail to find evidence of a leverage or liquidity effect. Although our findings indicate that the Fama–French model can partially explain some of the observed effects, we conclude that its performance is less than satisfactory in Australia.

Suggested Citation

  • Philip Gharghori & Ronald Lee & Madhu Veeraraghavan, 2009. "Anomalies and stock returns: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(3), pages 555-576, September.
  • Handle: RePEc:bla:acctfi:v:49:y:2009:i:3:p:555-576
    DOI: 10.1111/j.1467-629X.2009.00298.x
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    File URL: https://doi.org/10.1111/j.1467-629X.2009.00298.x
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    References listed on IDEAS

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