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

27 Pages Posted: 5 Jul 2012

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: June/July 2012

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

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 (June/July 2012). Journal of Business Finance & Accounting, Vol. 39, Issue 5‐6, pp. 758-784, 2012, Available at SSRN: https://ssrn.com/abstract=2100696 or http://dx.doi.org/10.1111/j.1468-5957.2012.02286.x

Sabine Artmann (Contact Author)

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

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

Philipp Finter

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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