IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Testing Factor Pricing Models in Tunisia: Macroeconomic Factors vs. Fundamental Factors

  • Hammami Yacine

    (University of Tunis ISCC Bizerte)

  • Jilani Faouzi

    (University of Tunis ISCC Bizerte)

The arbitrage pricing theory and the intertemporal capital asset pricing model do not identify the risk factors that drive expected stock returns. Two approaches have emerged from the literature to fill the gap: macroeconomic models and fundamental models. A common view is that macroeconomic models have sounder economic rationale than fundamental models, but the latter fit the data better than the former. However, many papers in the U.S. have recently shown that even in empirical work, macroeconomic models perform better than fundamental models. This paper addresses this issue in the Tunisian stock market. We found no evidence that fundamental models explain average returns better than macroeconomic models in Tunisia. On the contrary, a macroeconomic model that contains as factors the term structure, private bank lending and retail sales generate the best empirical results. The empirical evidence here and in the U.S. implies that the common practice of using exclusively fundamental models in many areas of financial research is inappropriate. Macroeconomic models should be considered in the empirical asset pricing literature in addition to, or instead of, fundamental models.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal Review of Middle East Economics and Finance.

Volume (Year): 7 (2011)
Issue (Month): 2 (September)
Pages: 1-22

in new window

Handle: RePEc:bpj:rmeecf:v:7:y:2011:i:2:n:5
Contact details of provider: Web page:

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bpj:rmeecf:v:7:y:2011:i:2:n:5. 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: (Peter Golla)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.