Determinants of Expected Stock Returns: Large Sample Evidence from the German Market

37 Pages Posted: 6 Aug 2010 Last revised: 28 Jul 2011

See all articles by Sabine Artmann

Sabine Artmann

University of Cologne - Faculty of Management, Economics and Social Sciences

Philipp Finter

University of Cologne - Centre for Financial Research (CFR); University of Cologne - Department of Finance

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2011

Abstract

This paper conducts a comprehensive asset pricing study based on a unique dataset for the German stock market. For the period 1963 to 2006 we show that value characteristics and momentum explain the cross-section of stock returns. Corresponding factor portfolios have significant premiums across various double-sorted characteristic-based test assets. In a horse race of competing asset pricing models the Fama-French 3-factor model does a poor job in explaining average stock returns. The Carhart 4-factor model performs much better, but a 4- factor model containing an earnings-to-price factor instead of a size factor does even slightly better.

Keywords: asset pricing, characteristics, risk factors, multifactor models, Germany

JEL Classification: G12

Suggested Citation

Artmann, Sabine and Finter, Philipp and Finter, Philipp and Kempf, Alexander, Determinants of Expected Stock Returns: Large Sample Evidence from the German Market (July 2011). Available at SSRN: https://ssrn.com/abstract=1653747 or http://dx.doi.org/10.2139/ssrn.1653747

Sabine Artmann

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

Philipp Finter (Contact Author)

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

University of Cologne - Department of Finance ( email )

Cologne, 50923
Germany

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
+49 221 470 2714 (Phone)
+49 221 470 3992 (Fax)

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