Explaining mispricing with Fama-French factors: New evidence from the multiscaling approach

Francis In, Sangbae Kim, Robert Faff*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

This article examines the Capital Asset Pricing Model (CAPM) over different frequencies utilizing a recently developed multiscaling method: wavelet analysis. Our empirical analysis shows that the risk factors are more relevant at the lower frequencies than at the higher frequencies in the traditional CAPM. In addition, the overreaction-related mispricing hypothesis explains the size effect but not the value premium. After incorporating the two risk factors (Small Minus Big (SMB) and High Minus Low (HML)), our empirical findings support the positive relationship between market risk and mean returns for big stocks, but not small stocks.

Original languageEnglish
Pages (from-to)323-330
Number of pages8
JournalApplied Financial Economics
Volume20
Issue number4
DOIs
Publication statusPublished - Feb 2010
Externally publishedYes

Fingerprint Dive into the research topics of 'Explaining mispricing with Fama-French factors: New evidence from the multiscaling approach'. Together they form a unique fingerprint.

Cite this