Conditional Asset Pricing and Stock Market Anomalies in Europe

41 Pages Posted: 8 Mar 2007 Last revised: 9 Jul 2008

See all articles by Rob Bauer

Rob Bauer

Maastricht University

Mathijs Cosemans

Erasmus University - Rotterdam School of Management

Peter C. Schotman

Maastricht University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2008

Abstract

This study provides European evidence on the ability of static and dynamic specifications of the Fama-French (1993) three-factor model to price 25 size-B/M portfolios. In contrast to US evidence, we detect a small-growth premium and find that the size effect is still present in Europe. Furthermore, we document strong time variation in factor risk loadings. Incorporating these risk fluctuations in conditional specifications of the three-factor model clearly improves its ability to explain time variation in expected returns. However, the model still fails to completely capture cross-sectional variation in returns as it is unable to explain the momentum effect.

Keywords: conditional asset pricing, time-varying risk, stock market anomalies

JEL Classification: G12, G14

Suggested Citation

Bauer, Rob and Cosemans, Mathijs and Schotman, Peter C., Conditional Asset Pricing and Stock Market Anomalies in Europe (March 1, 2008). European Financial Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=965842

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

Mathijs Cosemans (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

Burgemeester Oudlaan 50
Rotterdam
Netherlands
+31104082371 (Phone)
+31104089017 (Fax)

HOME PAGE: http://www.mathijscosemans.com

Peter C. Schotman

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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