In America's thrall: the effects of the US market and US security characteristics on Australian stock returns

Robert Durand, Manapon Limkriangkrai, Gary Smith

Research output: Contribution to journalArticle

30 Citations (Scopus)

Abstract

Can Australian equity returns be modelled by 'home-grown' factors? We examine the indigenous capital asset pricing model, the indigenous Fama-French three-factor model, and extensions to the latter, and find them all wanting. We find evidence of domestic market segmentation in Australia. For the smallest firms, all the models we study fail. For the largest Australian firms, we find that the US Fama-French three factors (downloaded from French's website: http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/) provide a successful model of Australian returns. It is as if the largest firms in the Australian market are simply part of the larger US market.
Original languageEnglish
Pages (from-to)577-604
JournalAccounting and Finance
Volume46
Issue number4
DOIs
Publication statusPublished - 2006

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