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Size and book-to-market factors in Australia

Author

Listed:
  • Tim Brailsford
  • Clive Gaunt

    (UQ Business School and Bond University, Australia)

  • Michael A O’Brien

    (Schroders Investment Management, Sydney, Australia)

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.

Suggested Citation

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

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    Cited by:

    1. Gordon, Narelle & Watts, Edward & Wu, Qiongbing, 2014. "Information attributes, information asymmetry and industry sector returns," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 156-175.
    2. 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.
    3. repec:sgm:jbfeuw:v:2:y:2017:i:8:p:27-53 is not listed on IDEAS
    4. repec:ods:journl:v:7:y:2018:i:1:p:15-23 is not listed on IDEAS
    5. Chris Ratcliffe & Bill Dimovski & Monica Keneley, 2017. "The Performance of REIT Acquirers in the Post-Merger Period," ERES eres2017_43, European Real Estate Society (ERES).
    6. Mai, Van Anh (Vivian) & Ang, Tze Chuan ‘Chewie’ & Fang, Victor, 2016. "Aggregate volatility risk and the cross-section of stock returns: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 134-149.
    7. Ron Bird & Xiaojun Gao & Danny Yeung, 2017. "Time-series and cross-sectional momentum strategies under alternative implementation strategies," Australian Journal of Management, Australian School of Business, vol. 42(2), pages 230-251, May.
    8. repec:bla:acctfi:v:57:y:2017:i::p:45-68 is not listed on IDEAS
    9. Heaney, Richard & Koh, SzeKee & Lan, Yihui, 2016. "Australian firm characteristics and the cross-section variation in equity returns," Pacific-Basin Finance Journal, Elsevier, vol. 37(C), pages 104-115.
    10. 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.
    11. repec:eee:pacfin:v:48:y:2018:i:c:p:1-16 is not listed on IDEAS
    12. repec:bla:acctfi:v:57:y:2017:i:3:p:855-877 is not listed on IDEAS
    13. repec:bla:acctfi:v:56:y:2016:i:4:p:1097-1117 is not listed on IDEAS

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