The Australian Asset‐Pricing Debate

29 Pages Posted: 3 Jun 2016

See all articles by Robert B. B. Durand

Robert B. B. Durand

Curtin University of Technology - School of Economics and Finance - Department of Finance and Banking

Manapon Limkriangkrai

Monash University; Financial Research Network (FIRN)

Daniel Chai

Monash University

Date Written: June 2016

Abstract

Utilising a comprehensive data set for Australian 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 Australian returns. A model accounting for Australia's integration with the US equity market appears to be the best of the competing models we study. Our argument that a model recognising Australia's integration with the USA is supported when we apply the portfolio and factor construction methodology suggested by Brailsford et al. (2012a,b).

Keywords: Asset‐pricing models, Fama–French–Carhart model, International integration, Momentum, Liquidity

Suggested Citation

Durand, Robert B. B. and Limkriangkrai, Manapon and Chai, Daniel, The Australian Asset‐Pricing Debate (June 2016). Accounting & Finance, Vol. 56, Issue 2, pp. 393-421, 2016, Available at SSRN: https://ssrn.com/abstract=2788249 or http://dx.doi.org/10.1111/acfi.12097

Robert B. B. Durand (Contact Author)

Curtin University of Technology - School of Economics and Finance - Department of Finance and Banking ( email )

Bentley 6102 WA
Australia

HOME PAGE: http://tiny.cc/y85rh

Manapon Limkriangkrai

Monash University ( email )

Wellington Road
Victoria, Clayton 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Daniel Chai

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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