Firm characteristics,alternative factors,and asset-pricing anomalies: evidence from Japan |
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Authors: | Pin-Huang Chou Kuan-Cheng Ko Szu-Tsen Kuo Shinn-Juh Lin |
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Institution: | 1. Department of Finance , National Central University , Jhongli 320 , Taiwan choup@cc.ncu.edu.tw;3. Department of Banking and Finance , National Chi Nan University , Puli 545 , Taiwan;4. Department of Finance , National Central University , Jhongli 320 , Taiwan;5. Department of International Business , National Chengchi University , Taipei 116 , Taiwan |
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Abstract: | Based on the errors-in-variables-free approach proposed by Brennan et al. J. Financial Econ., 1998, 49, 345–373], we investigate the competing explanatory capabilities of alternative multi-factor models when examining various asset-pricing anomalies using Japanese data for the period 1978–2006. We find that turnover and book-to-market (BM) ratio are the two major characteristics that significantly explain the average stock returns. A further sub-period analysis reveals that the turnover effect is significant only before 1990, but cannot be explained by any multifactor models. In contrast, the BM premium is significant only after 1990, and can be explained by the Fama–French three-factor model. Thus, the results suggest that asset-pricing anomalies documented in the literature are not universal, and may be different across different markets. |
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Keywords: | Factors Characteristics Asset-pricing anomalies Fama-MacBeth cross-sectional regression Least-trimmed squares |
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