Size and Book-to-Market Factors in Australia

Posted: 4 Aug 2012

See all articles by Timothy Brailsford

Timothy Brailsford

University of Queensland

Clive Gaunt

University of Queensland - Business School

Michael A O'Brien

University of Queensland - Business School; Schroder Investment Management Limited

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2012

Abstract

There is continuing debate in the asset-pricing literature as to the acceptance of the Fama–French three-factor model. While this model has received strong empirical support from tests in the US equity market, tests of the model in the Australian market have yielded inconclusive findings, particularly in respect of the high-minus-low factor. Prior research in Australia has suffered from limited datasets in respect of the accounting variables, and previous results vary with the scope of the dataset employed. Our study provides two advances. Firstly, the study utilizes a purpose-built dataset spanning 25 years and 98% of all listed firms. Secondly, the study employs a more appropriate portfolio construction method than that employed in prior studies. With these advances, the study is more able to test the three-factor model against the capital asset-pricing model (CAPM). The findings support the superiority of the Fama–French model, and for the first time align the research in this area between Australia and the USA

Keywords: asset pricing, book-to-market effect, capital asset-pricing model, Fama–French three-factor model, size effect

Suggested Citation

Brailsford, Timothy and Gaunt, Clive and O'Brien, Michael A and O'Brien, Michael A, Size and Book-to-Market Factors in Australia (April 26, 2012). Australian Journal of Management, Vol. 37, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2122507

Timothy Brailsford

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Clive Gaunt (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Michael A O'Brien

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Schroder Investment Management Limited ( email )

United States

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