IDEAS home Printed from https://ideas.repec.org/a/bla/irvfin/v16y2016i4p595-638.html
   My bibliography  Save this article

A Better Model? An Empirical Investigation of the Fama–French Five-factor Model in Australia

Author

Listed:
  • Mardy Chiah
  • Daniel Chai
  • Angel Zhong
  • Song Li

Abstract

No abstract is available for this item.

Suggested Citation

  • Mardy Chiah & Daniel Chai & Angel Zhong & Song Li, 2016. "A Better Model? An Empirical Investigation of the Fama–French Five-factor Model in Australia," International Review of Finance, International Review of Finance Ltd., vol. 16(4), pages 595-638, December.
  • Handle: RePEc:bla:irvfin:v:16:y:2016:i:4:p:595-638
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/irfi.12099
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gharghori, Philip & Mudumba, Shifali & Veeraraghavan, Madhu, 2007. "How smart is money? An investigation into investor behaviour in the Australian managed fund industry," Pacific-Basin Finance Journal, Elsevier, vol. 15(5), pages 494-513, November.
    2. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. Eugene F. Fama & Kenneth R. French, 1998. "Value versus Growth: The International Evidence," Journal of Finance, American Finance Association, vol. 53(6), pages 1975-1999, December.
    5. Alan Gregory & Rajesh Tharyan & Angela Christidis, 2013. "Constructing and Testing Alternative Versions of the Fama–French and Carhart Models in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(1-2), pages 172-214, January.
    6. John M. Griffin & Michael L. Lemmon, 2002. "Book‐to‐Market Equity, Distress Risk, and Stock Returns," Journal of Finance, American Finance Association, vol. 57(5), pages 2317-2336, October.
    7. Novy-Marx, Robert, 2013. "The other side of value: The gross profitability premium," Journal of Financial Economics, Elsevier, vol. 108(1), pages 1-28.
    8. Lewellen, Jonathan & Nagel, Stefan & Shanken, Jay, 2010. "A skeptical appraisal of asset pricing tests," Journal of Financial Economics, Elsevier, vol. 96(2), pages 175-194, May.
    9. Demir, Isabelle & Muthuswamy, Jay & Walter, Terry, 2004. "Momentum returns in Australian equities: The influences of size, risk, liquidity and return computation," Pacific-Basin Finance Journal, Elsevier, vol. 12(2), pages 143-158, April.
    10. Loughran, Tim, 1997. "Book-to-Market across Firm Size, Exchange, and Seasonality: Is There an Effect?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(3), pages 249-268, September.
    11. Paul Y Dou & David R Gallagher & David H Schneider, 2013. "Dissecting anomalies in the Australian stock market," Australian Journal of Management, Australian School of Business, vol. 38(2), pages 353-373, August.
    12. Bauer, Rob & Otten, Roger & Rad, Alireza Tourani, 2006. "Ethical investing in Australia: Is there a financial penalty?," Pacific-Basin Finance Journal, Elsevier, vol. 14(1), pages 33-48, January.
    13. Daniel, Kent & Titman, Sheridan, 1997. "Evidence on the Characteristics of Cross Sectional Variation in Stock Returns," Journal of Finance, American Finance Association, vol. 52(1), pages 1-33, March.
    14. Nick Durack & Robert B. Durand & Ross A. Maller, 2004. "A best choice among asset pricing models? The Conditional Capital Asset Pricing Model in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 139-162, July.
    15. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    16. Howard W. Chan & Robert W. Faff, 2005. "Asset Pricing and the Illiquidity Premium," The Financial Review, Eastern Finance Association, vol. 40(4), pages 429-458, November.
    17. S. P. Kothari & Jerold B. Warner, 2001. "Evaluating Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 56(5), pages 1985-2010, October.
    18. Philip Gharghori & Howard Chan & Robert Faff, 2007. "Are the Fama-French Factors Proxying Default Risk?," Australian Journal of Management, Australian School of Business, vol. 32(2), pages 223-249, December.
    19. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    20. Titman, Sheridan & Wei, K. C. John & Xie, Feixue, 2004. "Capital Investments and Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(4), pages 677-700, December.
    21. Sermin Gungor & Richard Luger, 2013. "Testing Linear Factor Pricing Models With Large Cross Sections: A Distribution-Free Approach," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(1), pages 66-77, January.
    22. Eugene F. Fama & Kenneth R. French, 2008. "Dissecting Anomalies," Journal of Finance, American Finance Association, vol. 63(4), pages 1653-1678, August.
    23. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    24. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-1152, September.
    25. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    26. Zhong, Angel & Limkriangkrai, Manapon & Gray, Philip, 2014. "Anomalies, risk adjustment and seasonality: Australian evidence," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 207-218.
    27. Daniel Chai & Binh Do, 2016. "Co-existence of short-term reversals and momentum in the Australian equity market," Australian Journal of Management, Australian School of Business, vol. 41(1), pages 55-76, February.
    28. Daniel Chai & Robert Faff & Philip Gharghori, 2013. "Liquidity in asset pricing: New Australian evidence using low-frequency data," Australian Journal of Management, Australian School of Business, vol. 38(2), pages 375-400, August.
    29. Tim Brailsford & Michael A. O'Brien, 2008. "Disentangling Size from Momentum in Australian Stock Returns," Australian Journal of Management, Australian School of Business, vol. 32(3), pages 463-484, March.
    30. Clive Gaunt, 2004. "Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(1), pages 27-44, March.
    31. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
    32. Cremers, Martijn & Petajisto, Antti & Zitzewitz, Eric, 2013. "Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation," Critical Finance Review, now publishers, vol. 2(1), pages 1-48, July.
    33. Philip Gray & David Gallagher, 2014. "Stock weighting and nontrading bias in estimated portfolio returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 54(2), pages 467-503, June.
    34. Michael J. Cooper & Huseyin Gulen & Michael J. Schill, 2008. "Asset Growth and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 63(4), pages 1609-1651, August.
    35. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    36. MacKinlay, A Craig & Richardson, Matthew P, 1991. "Using Generalized Method of Moments to Test Mean-Variance Efficiency," Journal of Finance, American Finance Association, vol. 46(2), pages 511-527, June.
    37. Fama, Eugene F. & French, Kenneth R., 2012. "Size, value, and momentum in international stock returns," Journal of Financial Economics, Elsevier, vol. 105(3), pages 457-472.
    38. John M. Griffin, 2002. "Are the Fama and French Factors Global or Country Specific?," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 783-803.
    39. Gray, Philip & Johnson, Jessica, 2011. "The relationship between asset growth and the cross-section of stock returns," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 670-680, March.
    40. Eugene F. Fama & Kenneth R. French, 2006. "The Value Premium and the CAPM," Journal of Finance, American Finance Association, vol. 61(5), pages 2163-2185, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert W. Faff, 2019. "Financial Openness and Trade Openness Nexus: Empirical Evidence from Global Data," Capital Markets Review, Malaysian Finance Association, vol. 27(2), pages 1-13.
    2. Nina Ryan & Xinfeng Ruan & Jin E. Zhang & Jing A. Zhang, 2021. "Choosing Factors for the Vietnamese Stock Market," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 14(3), pages 1-23, February.
    3. Songül Kakýllý Acaravcý & Yunus Karaömer, 2018. "The Comparative Performance Evaluation of the Fama-French Five Factor Model in Turkey," Isletme ve Iktisat Calismalari Dergisi, Econjournals, vol. 6(3), pages 1-12.
    4. Kanis Saengchote, 2020. "Profitability, Investment and Asset Pricing: Reconciling the Valuation and the q-Theory Approaches in the Thai Stock Market," PIER Discussion Papers 124, Puey Ungphakorn Institute for Economic Research.
    5. Hoang, Khoa & Cannavan, Damien & Gaunt, Clive & Huang, Ronghong, 2019. "Is that factor just lucky? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    6. Galariotis, Emilios & Li, Bob & Chai, Daniel, 2019. "Down but not out: Plenty of returns available for shorted down stocks," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 296-306.
    7. Zhong, Angel, 2018. "Idiosyncratic volatility in the Australian equity market," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 105-125.
    8. Zhong, Angel & Gray, Philip, 2016. "The MAX effect: An exploration of risk and mispricing explanations," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 76-90.
    9. Cao, Viet Nga & Gray, Philip & Zhong, Angel, 2019. "Investment-related anomalies in Australia: Evidence and explanations," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 97-109.
    10. Philipp Dirkx & Franziska J. Peter, 2020. "The Fama-French Five-Factor Model Plus Momentum: Evidence for the German Market," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(4), pages 661-684, October.
    11. Gray, Philip & Liao, Iris Siyu & Strydom, Maria, 2018. "The profitability of trading NOA and accruals: One effect or two?," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 211-224.
    12. Jaromír Antoch & Jan Hanousek & Marie Hušková & Jiří Trešl, 2019. "Detekce změn v panelových datech: Změna parametrů Fama-French modelu u vybraných evropských akcií v období finanční krize [Detection of Changes in Panel Data: Change in Fama-French Model Parameters," Politická ekonomie, Prague University of Economics and Business, vol. 2019(1), pages 3-19.
    13. Rahul Roy & Santhakumar Shijin, 2018. "A six-factor asset pricing model," Post-Print hal-01878923, HAL.
    14. Wenting Jiao & Jean-Jacques Lilti, 2017. "Whether profitability and investment factors have additional explanatory power comparing with Fama-French Three-Factor Model: empirical evidence on Chinese A-share stock market," China Finance and Economic Review, Springer, vol. 5(1), pages 1-19, December.
    15. Ruili Sun & Tiefeng Ma & Shuangzhe Liu & Milind Sathye, 2019. "Improved Covariance Matrix Estimation for Portfolio Risk Measurement: A Review," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(1), pages 1-34, March.
    16. Mark Kamstra & Ruoyao Shi, 2021. "A Note on the GRS Test," Working Papers 202111, University of California at Riverside, Department of Economics.
    17. Eckert, Christian & Gatzert, Nadine & Heidinger, Dinah, 2020. "Empirically assessing and modeling spillover effects from operational risk events in the insurance industry," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 72-83.
    18. Rahul Roy & Santhakumar Shijin, 2018. "A six-factor asset pricing model," Papers 1810.07790, arXiv.org.
    19. Mohsin Sadaqat & Hilal Anwar Butt, 2017. "Role of Liquidity in Explaining Anomalous Returns: Evidence from Emerging Market," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 1-35, September.
    20. Güler ARAS & İlhan ÇAM & Bilal ZAVALSIZ & Serkan KESKİN, 2018. "Fama-French Çok Faktör Varlık Fiyatlama Modellerinin Performanslarının Karşılaştırılması: Borsa İstanbul Üzerine Bir Uygulama," Istanbul Business Research, Istanbul University Business School, vol. 47(2), pages 183-207, November.
    21. Kouaissah, Noureddine, 2021. "Using multivariate stochastic dominance to enhance portfolio selection and warn of financial crises," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 480-493.
    22. Moinak Maiti & Darko Vuković, 2020. "Role of human assets in measuring firm performance and its implication for firm valuation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-27, December.
    23. Chai, Daniel & Chiah, Mardy & Zhong, Angel, 2019. "Choosing factors: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 58(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian Walkshäusl & Sebastian Lobe, 2014. "The Alternative Three†Factor Model: An Alternative beyond US Markets?," European Financial Management, European Financial Management Association, vol. 20(1), pages 33-70, January.
    2. Zhong, Angel, 2018. "Idiosyncratic volatility in the Australian equity market," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 105-125.
    3. Hoang, Khoa & Cannavan, Damien & Gaunt, Clive & Huang, Ronghong, 2019. "Is that factor just lucky? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    4. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, September.
    5. Lu Zhang, 2017. "The Investment CAPM," European Financial Management, European Financial Management Association, vol. 23(4), pages 545-603, September.
    6. Stefan Nagel, 2013. "Empirical Cross-Sectional Asset Pricing," Annual Review of Financial Economics, Annual Reviews, vol. 5(1), pages 167-199, November.
    7. Tim Brailsford & Clive Gaunt & Michael A O’Brien, 2012. "Size and book-to-market factors in Australia," Australian Journal of Management, Australian School of Business, vol. 37(2), pages 261-281, August.
    8. Shanken, Jay & Zhou, Guofu, 2007. "Estimating and testing beta pricing models: Alternative methods and their performance in simulations," Journal of Financial Economics, Elsevier, vol. 84(1), pages 40-86, April.
    9. Betermier, Sebastien & Calvet, Laurent & Jo, Evan, 2019. "A Supply and Demand Approach to Equity Pricing," CEPR Discussion Papers 13974, C.E.P.R. Discussion Papers.
    10. Ilan Cooper & Paulo Maio, 2019. "Asset Growth, Profitability, and Investment Opportunities," Management Science, INFORMS, vol. 65(9), pages 3988-4010, September.
    11. 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.
    12. Mateus, Irina B. & Mateus, Cesario & Todorovic, Natasa, 2019. "Review of new trends in the literature on factor models and mutual fund performance," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 344-354.
    13. Eero Pätäri & Timo Leivo, 2017. "A Closer Look At Value Premium: Literature Review And Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 79-168, February.
    14. Cederburg, Scott & O’Doherty, Michael S., 2015. "Asset-pricing anomalies at the firm level," Journal of Econometrics, Elsevier, vol. 186(1), pages 113-128.
    15. Zhong, Angel & Limkriangkrai, Manapon & Gray, Philip, 2014. "Anomalies, risk adjustment and seasonality: Australian evidence," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 207-218.
    16. Joachim Freyberger & Andreas Neuhierl & Michael Weber, 2020. "Dissecting Characteristics Nonparametrically," Review of Financial Studies, Society for Financial Studies, vol. 33(5), pages 2326-2377.
    17. Michael Dempsey, 2015. "Stock Markets, Investments and Corporate Behavior:A Conceptual Framework of Understanding," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number p1007, September.
    18. Wu, Yuliang & Mazouz, Khelifa, 2016. "Long-term industry reversals," Journal of Banking & Finance, Elsevier, vol. 68(C), pages 236-250.
    19. Fama, Eugene F. & French, Kenneth R., 2012. "Size, value, and momentum in international stock returns," Journal of Financial Economics, Elsevier, vol. 105(3), pages 457-472.
    20. Kathrin Tauscher & Martin Wallmeier, 2016. "Portfolio Overlapping Bias in Tests of the Fama–French Three†Factor Model," European Financial Management, European Financial Management Association, vol. 22(3), pages 367-393, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:irvfin:v:16:y:2016:i:4:p:595-638. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1369-412X .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1369-412X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.