Are the Fama-French factors proxying news related to GDP Growth? The Australian evidence

Nguyen, Annette, Faff, Robert and Gharghori, Philip (2009) Are the Fama-French factors proxying news related to GDP Growth? The Australian evidence. Review of Quantitative Finance and Accounting, 33 2: 141-158. doi:10.1007/s11156-009-0137-8


Author Nguyen, Annette
Faff, Robert
Gharghori, Philip
Title Are the Fama-French factors proxying news related to GDP Growth? The Australian evidence
Journal name Review of Quantitative Finance and Accounting   Check publisher's open access policy
ISSN 0924-865X
1573-7179
Publication date 2009-08
Sub-type Article (original research)
DOI 10.1007/s11156-009-0137-8
Volume 33
Issue 2
Start page 141
End page 158
Total pages 18
Place of publication New York, United States
Publisher Springer New York LLC
Language eng
Abstract 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. © Springer Science+Business Media, LLC 2009.
Keyword GDP growth
Fama–French model
Asset pricing
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
 
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Created: Thu, 03 Mar 2011, 15:30:50 EST by Karen Morgan on behalf of UQ Business School