International tests of a five-factor asset pricing model

Eugene F. Fama and Kenneth French

Journal of Financial Economics, 2017, vol. 123, issue 3, 441-463

Abstract: Average stock returns for North America, Europe, and Asia Pacific increase with the book-to-market ratio (B/M) and profitability and are negatively related to investment. For Japan, the relation between average returns and B/M is strong, but average returns show little relation to profitability or investment. A five-factor model that adds profitability and investment factors to the three-factor model of Fama and French (1993) largely absorbs the patterns in average returns. As in Fama and French (2015, 2016), the model's prime problem is failure to capture fully the low average returns of small stocks whose returns behave like those of low profitability firms that invest aggressively.

Keywords: International asset pricing; Multifactor models; Dividend discount model (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (254)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:123:y:2017:i:3:p:441-463

DOI: 10.1016/j.jfineco.2016.11.004

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