An Alternative Three-Factor Model for International Markets: Evidence from the European Monetary Union

Manuel Ammann, Sandro Odoni () and David Oesch ()

No 1202, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: In this paper, we construct the three-factor model introduced by Chen et al. (2010) for a European sample covering 10 countries from the European Monetary Union and the period from 1990 to 2006. Two key findings result. First, we show that the properties of the European factors are comparable to those of the U.S. factors. Second, we show that the alternative three-factor model’s explanatory power is either equal or superior to the explanatory power of traditional models when applied to five commonly known stock market anomalies. Our results thus suggest the use of international versions of the Chen et al. (2010) factor model in addition to traditional factor models in international empirical finance research

Keywords: Multi-factor models; Cross-section of stock returns; Fama and French three-factor model. (search for similar items in EconPapers)
JEL-codes: E44 G12 G14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2012:02

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