The weakening value premium in the Australian and New Zealand stock markets

Chung, Y. Peter; Hsu, Chuan-Hao; Ke, Mei-Chu; Liao, Tung Liang; Chiang, Yi-Chein

doi:10.1016/j.pacfin.2015.12.007

Cited by 8 publications

(8 citation statements)

References 47 publications

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“…The value premium in our study is getting stronger over the time period. This is in contrast to the finding of Chung et al (2016), where it was concluded that value premium is getting weaker over the time period in the Australian market.…”

Section: Robustness Testcontrasting

confidence: 99%

“…Success of the Fama-French three factor model is, basically, a divergence in CAPM and emerged as a most popular explanation for the ongoing argument on asset pricing. However, several studies in the financial literature (e.g., Groenewold Fraser 1997;Beltratti and Tria 2002;Drew and Veeraraghan 2002;Mirza and Shahid 2008;Guo et al 2008;Lischewski and Voronkova 2012;Cakici et al 2013;Minović and Živković 2014;Baek and Bilson 2015;Boamah 2015;Ceylan et al 2015;Zaremba and Konieczka 2015;Elgammal et al 2016;Chung et al 2016; Xie and Qu 2016; Kubota and Takehara 2017) attribute mixed evidence regarding the existence, significance, augmented versions and time varying behavior of the risk premiums and the three-factor model in the stock markets of USA, Europe, Australia, Asia and Africa by applying various models and portfolio construction methodologies. Daniel and Titman (1997) examined the Fama and French (1993) and demonstrated that size and book-to-market factors are highly correlated with the average stocks returns but there is no separate distress and most of the co-movement of the value stocks is not due to distressed stocks being exposed to a unique distress factor.…”

Section: Prior Related Studiesmentioning

confidence: 99%

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Size, Value and Business Cycle Variables. The Three-Factor Model and Future Economic Growth: Evidence from an Emerging Market

Ali

Jiang

2018

Economies

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The paper empirically investigates three different methods to construct factors and identifies some pitfalls that arise in the application of Fama-French's three-factor model to the Pakistani stock returns. We find that the special features in Pakistan significantly affect size and value factors and also influence the explanatory power of the three-factor model. Additionally, the paper examines the ability of the three factors to predict the future growth of Pakistan's economy. Using monthly data of both financial and non-financial companies between 2002 and 2016, the article empirically investigates and finds that: (1) size and book-to-market factors exist in the Pakistani stock market, two mimic portfolios SMB and HML generate a return of 9.15% and 12.27% per annum, respectively; (2) adding SMB and HML factors into the model meaningfully increases the explanatory power of the model; and (3) the model's factors, except for value factor, predict future gross domestic product (GDP) growth of Pakistan and remain robust. Our results are robust across sub-periods, risk regimes, and under three different methods of constructing the factors.

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Section: Robustness Testcontrasting

confidence: 99%

Section: Prior Related Studiesmentioning

confidence: 99%

Size, Value and Business Cycle Variables. The Three-Factor Model and Future Economic Growth: Evidence from an Emerging Market

Ali

Jiang

2018

Economies

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“…This explains why the pattern remains undiscovered even in recent studies on India like Sehgal and Balakrishnan (2013), Aziz and Ansari (2014), Sehgal and Pandey (2014) and Ebrahim et al (2014). The findings of this article are more in tune with findings of other countries, such as Indonesia and Taiwan (Ding, Chua & Fetherston, 2005), UK, France, Germany and Italy (Abhyankar, Ho & Zhao, 2009), and Australia and New Zealand (Chung et al, 2016).…”

Section: Resultssupporting

confidence: 81%

“…However, in the words of John F. Kennedy, ‘Change is the law of life’ (John F. Kennedy presidential library and museum website, 1963). There have been mixed evidence of persistence and attenuation of anomalies since their discovery (e.g., Brennan, Chordia & Subrahmanyam, 1998; Cakici & Tan, 2014; Chung, Hsu, Ke, Liao & Chiang, 2016; Fama & French, 2015; Gillan, 1990; Kothari, Shanken & Sloan, 1995; Loughran, 1997; Schwert, 2003; Shum & Tang, 2005). Reasons being cited for attenuation range from increased implementation of strategies to capitalize on anomalous patterns by practitioners (Schwert, 2003) to deregulation of financial markets and enhancement of trading facilities (Chung et al, 2016).…”

Section: Literature Reviewmentioning

confidence: 99%

“…There have been mixed evidence of persistence and attenuation of anomalies since their discovery (e.g., Brennan, Chordia & Subrahmanyam, 1998; Cakici & Tan, 2014; Chung, Hsu, Ke, Liao & Chiang, 2016; Fama & French, 2015; Gillan, 1990; Kothari, Shanken & Sloan, 1995; Loughran, 1997; Schwert, 2003; Shum & Tang, 2005). Reasons being cited for attenuation range from increased implementation of strategies to capitalize on anomalous patterns by practitioners (Schwert, 2003) to deregulation of financial markets and enhancement of trading facilities (Chung et al, 2016). Besides, there have been evidence of reverse anomaly effects (Claessens, Dasgupta & Glen, 1995); time-varying behaviour of anomalies (Wu, Liu & Chen, 2016); anomalies varying according to monetary policies of the government (Jensen, Johnson & Mercer, 1997).…”

Section: Literature Reviewmentioning

confidence: 99%

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Changing Nature of the Value Premium in the Indian Stock Market

Harshita

Singh

Yadav

2018

Vision

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The article aims to test whether the nature of value premium has changed over time in the Indian stock market. Contrary to the existing literature on the Indian market, the analysis suggests that post the global crisis, the value premium has nearly ceased to exist. Using price-to-book (P/B) ratio as the proxy, the findings are robust to employing capital asset pricing model (CAPM) and the Fama and French three-factor (FF) model, and five alternative measures of returns: equal-weighted (whole and trimmed sample) and value-weighted (whole, trimmed and winsorized sample). Chow test suggests that the model parameters have changed over time. While the decrease in premium has been discovered for other countries, there was no such study in the Indian context. This is the first attempt of its kind. The findings have important implications for academia and investors.

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