Non-nested tests of a GDP-augmented Fama-French model versus a conditional Fama-French model in the Australian stock market

Faff, Robert, Gharghori, Philip and Nguyen, Annette (2014) Non-nested tests of a GDP-augmented Fama-French model versus a conditional Fama-French model in the Australian stock market. International Review of Economics and Finance, 29 627-638. doi:10.1016/j.iref.2013.07.007


Author Faff, Robert
Gharghori, Philip
Nguyen, Annette
Title Non-nested tests of a GDP-augmented Fama-French model versus a conditional Fama-French model in the Australian stock market
Journal name International Review of Economics and Finance   Check publisher's open access policy
ISSN 1059-0560
1873-8036
Publication date 2014-01-01
Year available 2013
Sub-type Article (original research)
DOI 10.1016/j.iref.2013.07.007
Volume 29
Start page 627
End page 638
Total pages 12
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Collection year 2014
Language eng
Subject 2002 Cultural Studies
2003 Language Studies
Abstract We extend Vassalou (2003) by conditioning the Fama-French model with the same macroeconomic variables used to construct a GDP factor. The motivation for doing so is to ascertain whether the ability of the GDP-augmented model to explain equity returns is actually due to news about future GDP growth or whether it is due to the macroeconomic conditioning variables used to construct the GDP factor. We compare the performance of a GDP-enhanced Fama-French model with the conditional Fama-French model using non-nested testing techniques. We find that the GDP-augmented model considerably underperforms the conditional version of the model.
Keyword Asset pricing
Fama-French model
GDP growth
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Available online: 27 July 2013.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
UQ Business School Publications
 
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