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A simple test of the Fama and French model using daily data: Australian evidence

The current study contributes to the empirical literature aimed at testing the Fama and French three-factor model, using daily Australian data. In general, the evidence found is quite favourable to the model based on formal asset pricing tests. However, when the estimated risk premia are taken into account, the support for the Fama-French model is less persuasive. In particular, a negative size premium is uncovered consistent with a wave of recent findings questioning its continued existence over recent years.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000176353
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 2 ()
Pages: 83-92

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:2:p:83-92
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  1. Bhardwaj, Ravinder K & Brooks, LeRoy D, 1993. "Dual Betas from Bull and Bear Markets: Reversal of the Size Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(4), pages 269-83, Winter.
  2. Andrew Clare, Richard Priestley & Steven Thomas, . "Reports of beta's death are premature: evidence from the UK," CERF Discussion Paper Series 96-05, Economics and Finance Section, School of Social Sciences, Brunel University.
  3. Paul A. Gompers & Andrew Metrick, 2001. "Institutional Investors And Equity Prices," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 229-259, February.
  4. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-55, March.
  5. Steven Heston & K. Rouwenhorst & Roberto Wessels, 2008. "The Role of Beta and Size in the Cross-Section of European Stock Returns," Yale School of Management Working Papers ysm86, Yale School of Management.
  6. 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.
  7. 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.
  8. Pettengill, Glenn N. & Sundaram, Sridhar & Mathur, Ike, 1995. "The Conditional Relation between Beta and Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(01), pages 101-116, March.
  9. Handa, Puneet & Kothari, S. P. & Wasley, Charles, 1989. "The relation between the return interval and betas : Implications for the size effect," Journal of Financial Economics, Elsevier, vol. 23(1), pages 79-100, June.
  10. Ravi Jagannathan & Zhenyu Wang, 1996. "The conditional CAPM and the cross-section of expected returns," Staff Report 208, Federal Reserve Bank of Minneapolis.
  11. Tyler Shumway & Vincent A. Warther, 1999. "The Delisting Bias in CRSP's Nasdaq Data and Its Implications for the Size Effect," Journal of Finance, American Finance Association, vol. 54(6), pages 2361-2379, December.
  12. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
  13. Raymond Kan & Chu Zhang, 1999. "Two-Pass Tests of Asset Pricing Models with Useless Factors," Journal of Finance, American Finance Association, vol. 54(1), pages 203-235, 02.
  14. Horowitz, Joel L. & Loughran, Tim & Savin, N. E., 2000. "Three analyses of the firm size premium," Journal of Empirical Finance, Elsevier, vol. 7(2), pages 143-153, August.
  15. Kothari, S P & Shanken, Jay & Sloan, Richard G, 1995. " Another Look at the Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 185-224, March.
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