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The A ustralian asset‐pricing debate
Author(s) -
Durand Robert B.,
Limkriangkrai Manapon,
Chai Daniel
Publication year - 2016
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12097
Subject(s) - capital asset pricing model , economics , portfolio , market liquidity , financial economics , consumption based capital asset pricing model , market portfolio , equity (law) , risk premium , econometrics , momentum (technical analysis) , asset (computer security) , actuarial science , monetary economics , computer science , political science , law , computer security
Utilising a comprehensive data set for A ustralian firms, we examine a range of competing asset‐pricing models, including the four‐ and five‐factor models where the equity‐risk premium is augmented by size, value, momentum and liquidity premia, and find that none of the models tested appears to adequately explain the cross section of A ustralian returns. A model accounting for A ustralia's integration with the US equity market appears to be the best of the competing models we study. Our argument that a model recognising A ustralia's integration with the USA is supported when we apply the portfolio and factor construction methodology suggested by Brailsford et al . (2012a,b).