TY - JOUR
T1 - Are the Fama-French factors proxying news related to GDP growth? The Australian evidence
AU - Nguyen, Annette
AU - Faff, Robert
AU - Gharghori, Philip
N1 - Funding Information:
Acknowledgments We are grateful to two anonymous referees and to conference participants at the 2007 AFAANZ conference in the Gold Coast, the 2007 European Financial Management Association conference in Vienna and the 2007 Multinational Finance Society conference in Thessaloniki for helpful comments. The financial assistance provided by an AFAANZ grant (1779281) and an ARC Linkage grant (LP0453913) are gratefully acknowledged.
Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2009/7
Y1 - 2009/7
N2 - Inspired by Vassalou (J Financ Econ 68:47-73, 2003), we investigate the contention that the Fama and French (J Financ Econ 33:3-56, 1993) model's ability to explain the cross sectional variation in equity returns is because the Fama-French factors are proxying for risk associated with future GDP growth in the Australian equities market. To assess the validity of Vassalou's findings, we augment the CAPM and the Fama-French model with a GDP growth factor and run system regressions of the GDP-enhanced models using the GMM approach. Our results suggest that news about future GDP growth is not priced in equity returns and that any ability that SMB and HML exhibit in explaining equity returns is not because they contain information about future GDP growth.
AB - Inspired by Vassalou (J Financ Econ 68:47-73, 2003), we investigate the contention that the Fama and French (J Financ Econ 33:3-56, 1993) model's ability to explain the cross sectional variation in equity returns is because the Fama-French factors are proxying for risk associated with future GDP growth in the Australian equities market. To assess the validity of Vassalou's findings, we augment the CAPM and the Fama-French model with a GDP growth factor and run system regressions of the GDP-enhanced models using the GMM approach. Our results suggest that news about future GDP growth is not priced in equity returns and that any ability that SMB and HML exhibit in explaining equity returns is not because they contain information about future GDP growth.
UR - http://www.scopus.com/inward/record.url?scp=70349329860&partnerID=8YFLogxK
U2 - 10.1007/s11156-009-0137-8
DO - 10.1007/s11156-009-0137-8
M3 - Article
AN - SCOPUS:70349329860
SN - 0924-865X
VL - 33
SP - 141
EP - 158
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
IS - 2
ER -