Are the Fama and French Factors Global or Country Specific?

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ID: 307642
2002
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Abstract
This article examines whether country-specific or global versions of Fama and French’s three-factor model better explain time-series variation in international stock returns. Regressions for portfolios and individual stocks indicate that domestic factor models explain much more time-series variation in returns and generally have lower pricing errors than the world factor model. In addition, decomposing the world factors into domestic and foreign components demonstrates that the addition of foreign factors to domestic models leads to less accurate in-sample and out-of-sample pricing. Practical applications of the three-factor model, such as cost of capital calculations and performance evaluations, are best performed on a country-specific basis.
Reference Key
openalex_W2035293670 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors John M. Griffin
Journal review of financial studies
Year 2002
DOI
10.1093/rfs/15.3.783
URL
https://doi.org/10.1093/rfs/15.3.783
Keywords Keywords not found

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