In this paper, we construct the three-factor model introduced by
Chen et al. (2010) for a European sample covering 10 countries from
the European Monetary Union and the period from 1990 to 2006. Two
key findings result. First, we show that the properties of the
European factors are comparable to those of the U.S. factors.
Second, we show that the alternative three-factor model’s
explanatory power is either equal or superior to the explanatory
power of traditional models when applied to five commonly known
stock market anomalies.
Our results thus suggest the use of international versions of the Chen et al. (2010) factor model in addition to traditional factor models in international empirical finance research.
Multi-factor models; Cross-section of stock returns; Fama and French three-factor
|kind of paper||journal article|
|date of appearance||7-2012|
|journal||Journal of Banking & Finance|
|volume of journal||36|
|number of issue||7|
|citation||Ammann, M., Odoni, S., & Oesch, D. (2012). An Alternative Three-factor Model for International Markets: Evidence from the European Monetary Union. Journal of Banking & Finance, 36(7), 1857-1864, DOI:10.1016/j.jbankfin.2012.02.001.|