The Formulation of the Four Factor Model when a Considerable Proportion of Firms is Dual-Listed

30 Pages Posted: 5 Sep 2014

See all articles by Sharon Garyn-Tal

Sharon Garyn-Tal

Max Stern Academic College of Emek Yezreel

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration; European Corporate Governance Institute (ECGI)

Date Written: August 1, 2014

Abstract

We examine the performance of the Fama-French-Carhart four factor asset pricing model in an economy, Israel, where a relatively large proportion of shares (14.4% in our sample) are dually listed, i.e. trade also on NYSE or NASDAQ. We find that a hybrid model (adding U.S. or global factors to the local 4 factors model) performs only slightly better than the local model, casting doubt on the practical necessity of hybrid models. Further tests suggest that the dually listed shares should not be excluded when constructing the local factors.

Keywords: Local and hybrid four factor models; Dually-listed shares; Fama-French- Carhart model.

JEL Classification: G12, G15

Suggested Citation

Garyn-Tal, Sharon and Lauterbach, Beni, The Formulation of the Four Factor Model when a Considerable Proportion of Firms is Dual-Listed (August 1, 2014). Available at SSRN: https://ssrn.com/abstract=2490941 or http://dx.doi.org/10.2139/ssrn.2490941

Sharon Garyn-Tal

Max Stern Academic College of Emek Yezreel ( email )

Emek Yezreel, 19300
Yezreel 19300
Israel

Beni Lauterbach (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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