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Determinants of expected stock returns: Large sample evidence from the German market

  • Artmann, Sabine
  • Finter, Philipp
  • Kempf, Alexander
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    This paper conducts a comprehensive asset pricing study based on a unique dataset for the German stock market. For the period 1963 to 2006 we show that two value characteristics (book-to-market equity, earnings-to-price) and momentum explain the cross-section of stock returns. Corresponding factor portfolios have significant premiums across various doublesorted characteristic-based test assets. In a horse race of competing asset pricing models the Fama-French 3-factor model does a poor job in explaining average stock returns, whereas the Carhart 4-factor model performs well. However, both models are inferior to a 4-factor model containing an earnings-to-price factor instead of a size factor.

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    Paper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 10-01.

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    Date of creation: 2010
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    Handle: RePEc:zbw:cfrwps:1001
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