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Choosing factors: Australian evidence

Daniel Chai, Mardy Chiah and Angel Zhong

Pacific-Basin Finance Journal, 2019, vol. 58, issue C

Abstract: Using a factor-pricing approach, this paper investigates the extent to which the factors in the Fama–French five-factor model, including momentum, explain Australian equity returns. A comparison of the United States and Australia suggests common components in asset returns. All the factors examined are useful in pricing Australian equities, whereas the HML factor is redundant for the United States. The findings suggest that the Fama–French five-factor model should be at least considered as a benchmark model in asset pricing research.

Keywords: Asset pricing models; Fama–French factors; Spanning tests (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.pacfin.2019.101223

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