In America's Thrall: The Effects of the Us Market and Us Security Characteristics on Australian Stock Returns

28 Pages Posted: 20 Oct 2006

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

The University of Western Australia - Department of Accounting and Finance

Gary W. Smith

The University of Western Australia - Department of Accounting and Finance

Abstract

Can Australian equity returns be modelled by 'home-grown' factors? We examine the indigenous capital asset pricing model, the indigenous Fama-French three-factor model, and extensions to the latter, and find them all wanting. We find evidence of domestic market segmentation in Australia. For the smallest firms, all the models we study fail. For the largest Australian firms, we find that the US Fama-French three factors (downloaded from French's website) provide a successful model of Australian returns. It is as if the largest firms in the Australian market are simply part of the larger US market.

Suggested Citation

Durand, Robert B. B. and Limkriangkrai, Manapon and Smith, Gary William, In America's Thrall: The Effects of the Us Market and Us Security Characteristics on Australian Stock Returns. Accounting and Finance, Vol. 46, No. 4, pp. 577-604, December 2006. Available at SSRN: https://ssrn.com/abstract=938833 or http://dx.doi.org/10.1111/j.1467-629X.2006.00184.x

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

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Gary William Smith

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

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