Do the Fama and French Factors Proxy for State Variables that Predict Macroeconomic Growth in the Eurozone?

Hanhardt, Andreas; Olcoz, Carmen Ansotegui

doi:10.2139/ssrn.1098225

Cited by 8 publications

(6 citation statements)

References 81 publications

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“…Thus, we implicitly average the effects of these risk-factors over industries and regions. Adamsson and Hoepner (2015), however, show that risk characteristics, such as size, value and momentum, vary across sectors and that conditioning on industryspecific risk factors affects the performance implications of exclusionary screening (see also Li et al 2006;Hanhardt and Ansotegui 2008). While this is unlikely to affect our findings regarding the norm-based screens-exclusions due to violations of norms are not industry-dependent-we cannot rule out that our sector-based screening results are driven by industry-specific risk factors.…”

Section: Industry-specific Risk Factorsmentioning

confidence: 81%

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Hoepner

Schopohl

2016

J Bus Ethics

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This study empirically analyses the exclusion of companies from investors' investment universe due to a company's business model (sector-based exclusion) or due to a company's violations of international norms (normbased exclusion). We conduct a time-series analysis of the performance implications of the exclusion decisions of two leading Nordic investors, Norway's Government Pension Fund-Global (GPFG) and Sweden's AP-funds. We find that their portfolios of excluded companies do not generate an abnormal return relative to the funds' benchmark index. While the exclusion portfolios show higher risk than the respective benchmark, this difference is only statistically significant for the case of GPFG. These findings suggest that the exclusion of the companies generally does not harm funds' performance. We interpret these findings as indicative that with exclusionary screening, as practiced by the sample funds, asset owners can meet the ethical objectives of their beneficiaries without compromising financial returns.

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Section: Industry-specific Risk Factorsmentioning

confidence: 81%

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Hoepner

Schopohl

2016

J Bus Ethics

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“…Liew and Vassalou (2000) and Vassalou (2003) reported that SMB and HML convey significant information about future GDP growth not present in the market portfolio. Hanhardt and Ansotegui (2008) found that this result extends to (twelve countries of) the euro zone. Xing (2008) claimed that HML may approximate for the growth rate of capital investment.…”

Section: Introductionmentioning

confidence: 84%

Misunderstanding Risk and Return?

Lioui

Poncet

2011

SSRN Journal

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“…(2) Font-Belaire and Grau-Grau [27] provided evidence on the positive and statistically significant relationship between future GDP growth and the SMB risk factor of the Spanish market during the period from 1995 to 2000. (3) Hanhardt and Ansotegui [28] used data from 1990 to 2008 and found that the SMB risk factor has an explanatory capacity for the future economic growth of the Euro Zone. (4) Fajardo and Fialho [29], using Brazilian market data from 1995 to 2008, observed that the risk factor SMB and HML are positively related to economic growth and negatively related to inflation.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The studies that analyzed the relationship between future economic growth and the risk factors of the models [13,14], such as [28,34,35], attested that such risk factors, of regional and global nature, individually or in association with each other, help to predict future domestic economic growth. The risk factors of a global nature of the developed and emerging stock markets will be used to test the following investigation hypotheses: Hypothesis 1.…”

Section: Hypothesismentioning

confidence: 99%

“…Economic performance (GDP) GDP growth rate [19,[26][27][28][29][30][31][32][33][34][35] Independent Variables-Stock market risk factor Market beta risk factor (MKT) Difference between the market portfolio rate of return and the risk-free rate Positive [19,[26][27][28][29][30][31][32][33][34][35] Size B/M (SMB B/M ) [13] Difference between the returns of diversified portfolios of stocks of small and large companies with high and low B/M ratio Positive [19,[26][27][28][29][30][31][32][33][34] Size operating profit (SMB OP ) [14] Difference between returns of diversified portfolios of stocks of small and large companies with high and low operating income Positive N.A.…”

Section: Dependent Variablementioning

confidence: 99%

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Economic Performance and Stock Market Integration in BRICS and G7 Countries: An Application with Quantile Panel Data and Random Coefficients Modeling

et al. 2022

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The interest in studies aimed at understanding the integration of the stock market with the economic performance of countries has been growing in recent years, perhaps driven by the recent economic crises faced by the world. Although several studies on the topic have been carried out, the results are still far from a meaningful conclusion. In this sense, this paper considered the dual objective of investigating whether there is significant variance in the economic performance of developed and emerging markets’ countries and whether the global risk factors are statistically significant in explaining the variations in their future economic performance over time. From a sample of (i) gross domestic products from BRICS and G7 countries (total of twelve countries), and (ii) returns of the risk factors of developed and emerging stock markets for the period 1993 to 2019, we applied longitudinal regression modeling for five distinct percentiles, and random coefficients modeling (RCM) with repeated measures. We found that risk factors explain the future economic performance, there is significant variation in economic performance over time among countries, and the temporal variation in the random effects of intercepts can be explained by RCM. The results of this study confirm that stock markets follow an integration process and that moderately integrated markets may have the same risk factors. Furthermore, considering that risk factors are related to future GDP growth, they act as proxies for unidentified state variables.

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Do the Fama and French Factors Proxy for State Variables that Predict Macroeconomic Growth in the Eurozone?

Cited by 8 publications

References 81 publications

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Misunderstanding Risk and Return?

Economic Performance and Stock Market Integration in BRICS and G7 Countries: An Application with Quantile Panel Data and Random Coefficients Modeling

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