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, vol. 33, no. 2, pp. 141-158, doi: 10.1007/s11156-009-0137-8.

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Title Are the Fama–French factors proxying news related to GDP growth? The Australian evidence.
Author(s) Nguyen, AnnetteORCID iD for Nguyen, Annette
Faff, Robert
Gharghori, Philip
Journal name Review of quantitative finance and accounting
Volume number 33
Issue number 2
Start page 141
End page 158
Total pages 18
Publisher Springer
Place of publication Dordrecht, The Netherlands
Publication date 2009-08
ISSN 0924-865X
Keyword(s) GDP growth
Fama–French model
asset pricing
Summary 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.
Language eng
DOI 10.1007/s11156-009-0137-8
Field of Research 150205 Investment and Risk Management
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2009, Springer Science+Business Media, LLC
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School of Accounting, Economics and Finance
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