Corporate ownership structure, market anomalies and asset pricing

Marc Desban () and Souad Lajili Jarjir ()
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Marc Desban: University Paris-Est
Souad Lajili Jarjir: University Paris-Est

Journal of Asset Management, 2018, vol. 19, issue 5, No 4, 316-340

Abstract: Abstract Identifying and assessing risks remain a challenging issue for academics and professionals. In this study, we investigate whether a link can be made between market anomalies and corporate ownership structure. Actually, the French market is seen as an ‘insider system’ with high concentrated ownership structures that encourage long-term relationships between the companies and investors. Besides, in France, Government ownership is common. Adding to these local characteristics the legal context, distortions in returns can be observed on stock market. Through a large sample comprising 1163 firms over more than a quarter century (from January 1990 to June 2016), this study brings deep insights about asset pricing models in the French stock market. Unlike US firms, we document a positive relation between French companies with high asset growth rates and stock return. We propose an alternative five-factor model with orthogonal size, value, reversed investment and quality designed for the French market. Our model is more suitable than ‘standard’ asset pricing models to estimate the cost of capital, evaluate abnormal returns and optimize portfolio allocation strategies.

Keywords: Asset pricing; Corporate ownership; Risk factors; Market anomalies; Investment and quality (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41260-018-0085-8

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