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The Cross-Section of German Stock Returns: New Data and New Evidence

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  • Sabine Artmann
  • Philipp Finter
  • Alexander Kempf
  • Stefan Koch
  • Erik Theissen

Abstract

We introduce a new data set that comprises factor returns and returns of portfolios that are single- and double-sorted. We use this data set to perform asset-pricing tests for the german equity market. We test the standard cAPM, the Fama-French (1993) three-factor model, and the carhart (1997) four-factor model. Our tests are based on a more comprehensive data set than are earlier studies. We investigate the sensitivity of our results to the choice of test assets. Our results indicate that none of the models can consistently explain the cross-section of returns, and that the results of asset-pricing tests are sensitive to the choice of test assets.

Suggested Citation

  • Sabine Artmann & Philipp Finter & Alexander Kempf & Stefan Koch & Erik Theissen, 2012. "The Cross-Section of German Stock Returns: New Data and New Evidence," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 64(1), pages 20-43, January.
  • Handle: RePEc:sbr:abstra:v:64:y:2012:i:1:p:20-43
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    Cited by:

    1. Oestreich, A. Marcel & Tsiakas, Ilias, 2015. "Carbon emissions and stock returns: Evidence from the EU Emissions Trading Scheme," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 294-308.
    2. Auer, Benjamin R. & Schuhmacher, Frank, 2016. "Do socially (ir)responsible investments pay? New evidence from international ESG data," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 51-62.
    3. repec:eee:empfin:v:44:y:2017:i:c:p:66-90 is not listed on IDEAS
    4. Matthias Bank & Martin Larch & Georg Peter, 2011. "Google search volume and its influence on liquidity and returns of German stocks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 25(3), pages 239-264, September.
    5. Auer Benjamin R., 2012. "Lassen sich CAPM, HCAPM und CCAPM durch konsumbasierte zeitvariable Parameterspezifikation rehabilitieren? / Can Time-varying Parameter Specification Based on Consumption Variables Rehabilitate CAPM, ," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(5), pages 518-544, October.
    6. Tommy Jehmlich & Friedrich Thießen & Elisabeth Ude, 2017. "Systematische Überrenditen mit Standardstrategien Eine empirische Untersuchung von Value- und Growth-Investmentstrategien am deutschen Aktienmarkt," Chemnitz Economic Papers 013, Department of Economics, Chemnitz University of Technology, revised Aug 2017.
    7. Friedrich-Carl Franz & Tobias Regele, 2016. "Beating the DAX, MDAX, and SDAX: investment strategies in Germany," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(2), pages 161-204, May.
    8. repec:eee:glofin:v:34:y:2017:i:c:p:32-42 is not listed on IDEAS
    9. Cuthbertson, Keith & Nitzsche, Dirk, 2013. "Performance, stock selection and market timing of the German equity mutual fund industry," Journal of Empirical Finance, Elsevier, vol. 21(C), pages 86-101.
    10. Benjamin R. Auer, 2016. "Do Socially Responsible Investment Policies Add or Destroy European Stock Portfolio Value?," Journal of Business Ethics, Springer, vol. 135(2), pages 381-397, May.
    11. Andres, Christian & Fernau, Erik & Theissen, Erik, 2014. "Should I stay or should I go? Former CEOs as monitors," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 26-47.
    12. Bohl, Martin T. & Kaufmann, Philipp & Stephan, Patrick M., 2013. "From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks," Energy Economics, Elsevier, vol. 37(C), pages 40-51.
    13. Souček, Michael & Wasserek, Thomas, 2014. "Impact of analyst recommendations on stock returns: Evidence from the German stock market," Discussion Papers 358, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    14. Bohl, Martin T. & Czaja, Marc-Gregor & Kaufmann, Philipp, 2016. "Momentum profits, market cycles, and rebounds: Evidence from Germany," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 139-159.
    15. Christian Fieberg & Armin Varmaz & Thorsten Poddig, 2016. "Covariances vs. characteristics: what does explain the cross section of the German stock market returns?," Business Research, Springer;German Academic Association for Business Research, vol. 9(1), pages 27-50, April.

    More about this item

    Keywords

    Asset Pricing; Carhart; Fama; French; Germany; Characteristics; Momentum; Risk Factors; Size; Value;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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