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An examination of conditional asset pricing models in the Australian equities market

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  • Annette Nguyen
  • Robert Faff
  • Philip Gharghori

Abstract

This article examines the link between macroeconomic variables and equity returns in Australia by testing conditional asset pricing models. We find that conditioning the Fama–French model with a series of macroeconomic variables does not considerably improve its performance. However, we do find that the Fama–French factors, SMB and HML, retain their ability to explain equity returns even after the model is conditioned on macroeconomic variables. Our findings suggest that investors do not adjust their risk premiums according to the changes in the macroeconomic variables we employ.

Suggested Citation

  • Annette Nguyen & Robert Faff & Philip Gharghori, 2007. "An examination of conditional asset pricing models in the Australian equities market," Applied Financial Economics Letters, Taylor & Francis Journals, vol. 3(5), pages 307-312.
    • Handle: RePEc:taf:raflxx:v:3:y:2007:i:5:p:307-312
    DOI: 10.1080/17446540701222409
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