Do Wall Street fundamentals work in the ASX200?

This paper follows the work of O’Shaughnessy, whose book, ‘What Works on Wall Street’ benchmarked the expectations of a variety of fundamental variables on the US stock market.
In essence, O’Shaughnessy documented a number of relationships between various fundamental variables and expected market returns. A valid criticism when applying work such as O’Shaughnessy’s to the Australian market is that Australian investors may value different fundamental characteristics to US investors. The purpose of this paper is to determine the extent to which O’Shaughnessy’s findings are relevant to the Australian stock market.
This paper investigates those fundamental variables, albeit with a slightly differing methodology, and documents a number of similar findings, as well as a few surprises.