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The Australian asset-pricing debate

Author

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  • Robert B. Durand
  • Manapon Limkriangkrai
  • Daniel Chai
  • David Gallagher

Abstract

type="main" xml:id="acfi12097-abs-0001"> Utilising a comprehensive data set for Australian firms, we examine a range of competing asset-pricing models, including the four- and five-factor models where the equity-risk premium is augmented by size, value, momentum and liquidity premia, and find that none of the models tested appears to adequately explain the cross section of Australian returns. A model accounting for Australia's integration with the US equity market appears to be the best of the competing models we study. Our argument that a model recognising Australia's integration with the USA is supported when we apply the portfolio and factor construction methodology suggested by Brailsford et al. (2012a,b).

Suggested Citation

  • Robert B. Durand & Manapon Limkriangkrai & Daniel Chai & David Gallagher, 2016. "The Australian asset-pricing debate," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(2), pages 393-421, June.
    • Handle: RePEc:bla:acctfi:v:56:y:2016:i:2:p:393-421
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    File URL: http://hdl.handle.net/10.1111/acfi.2016.56.issue-2
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    Cited by:

    1. Ding, Cherng G. & Wang, Hung-Jui & Lee, Meng-Che & Hung, Wen-Chi & Jane, Ten-Der, 2021. "Assessing the reversal of investor sentiment," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. Hoang, Khoa & Cannavan, Damien & Gaunt, Clive & Huang, Ronghong, 2019. "Is that factor just lucky? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    3. Zhong, Angel, 2018. "Idiosyncratic volatility in the Australian equity market," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 105-125.
    4. 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.

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