Financial Distress, Market Anomalies and Single and Multifactor Asset Pricing Models: New Evidence

Hussain, Syed I.; Toms, Steve; Diacon, Steve

doi:10.2139/ssrn.313001

Cited by 19 publications

(12 citation statements)

References 36 publications

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“…The results suggest that firms with larger size earn lower stock returns. The results are consistent with Hussain, Toms, and Diacon (2002), Charitou and Constantinidi, (2003), and Leledakis, Davidson and Smith (2004) that show the existence of size premium in the UK stock market.…”

Section: Empirical Results Based On Firm Level Regressionssupporting

confidence: 88%

Firms’ Degree of Internationalisation and the Cross-Section of Stock Returns: Evidence from Multinational Listed Companies in the U.K.

Hashem

2012

SSRN Journal

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This paper proposes two main opposing channels through which firms' degree of internationalisation affects stock returns. In particular, firms that operate internationally benefit from risk reduction via diversification channel and also encounter higher risk exposure due to various risk factors in international markets. Using a sample of 566 multinational publicly listed companies in the London Stock Exchange during 1999 and 2010, this paper empirically tests whether firms' degree of internationalisation is a new asset pricing factor in addition to the standard risk factors such as beta, size, book-to-market, leverage, momentum, and product market competition. The results show that firms' degree of internationalisation is positively and significantly related to the cross-section of stock returns in all Fama and MacBeth regressions, even after accounting for beta, size, book-to-market, leverage, and momentum. In addition, the effect of internationalisation on stock return becomes statistically insignificant after controlling for product market competition, indicating that the interaction term between competition and internationalisation plays a role in explaining stock returns. Overall, the empirical findings indicate that firms or industries with higher degree of internationalisation earn, on average, higher risk-adjusted returns. The results of this paper suggest that although multinational firms can benefit from cash flow diversification by going international, firms with higher degree of internationalisation are risky than firms with lower degree of internationalisation due to higher political, foreign exchange, and distress risks faced by multinational companies in international markets.

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Section: Empirical Results Based On Firm Level Regressionssupporting

confidence: 88%

Firms’ Degree of Internationalisation and the Cross-Section of Stock Returns: Evidence from Multinational Listed Companies in the U.K.

Hashem

2012

SSRN Journal

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“…Gregory et al (2001) base their BTM breakpoints on the 30 th and 70 th percentiles of the largest 350 firms, whereas DNQ use the 40 th and 60 percentiles. More typically, other UK studies (AlHorani et al, 2003;Fletcher, 2001;Fletcher and Forbes, 2002;Hussain et al, 2002;Liu et al, 1999 andMiles andTimmerman, 1996) use the median of all firms. For the reasons outlined in the introduction, we believe it is important to consider the likely investable universe for large investors, and given the weight of the evidence in MMS, we follow the largest 350 firms method found in Gregory et al (2001Gregory et al ( , 2003 and Gregory and Michou (2009, hereafter GM).…”

Section: Methodsmentioning

confidence: 99%

Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK

2011

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We would like to thank the Leverhulme Trust for supporting the project which gave rise to this investigation. We would also like to thank the Editor, Peter Pope, and an anonymous referee for their constructive and helpful comments on an earlier draft of the paper. 2 Constructing and Testing Alternative Versions of the Fama-French and Momentum Portfolios and Factors in the UK AbstractThe aim of this paper is to construct and test alternative versions of the Fama-French and Carhart models for the UK market. We conduct a comprehensive analysis of such models, forming risk factors using approaches advanced in the recent literature including value weighted factor components and various decompositions of the risk factors. We also test whether such factor models can at least explain the returns of large firms. Despite these various approaches, we join Michou, Mouselli and Stark (2007) and Fletcher (2010) in demonstrating that such factor models fail to reliably describe the cross-section of returns in the UK.

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“…The Fletcher, 2001;Fletcher and Forbes, 2002;Hussain et al, 2002;Liu et al, 1999 andMiles andTimmerman, 1996) use the median of all firms. In this paper, given the importance of considering the investable universe, and given the weight of the evidence in MMS, we follow the largest 350 firms method found Gregory et al (2001Gregory et al ( , 2003 and Gregory and Michou (2009, hereafter GM).…”

Section: Methodsmentioning

confidence: 99%

The Fama-French and Momentum Portfolios and Factors in the UK

2009

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The primary aim of this paper is to make available the Fama-French and Momentum portfolios and factors for the UK market to the wide community of UK academic and post-graduate researchers. As Michou, Mouselli and Stark (2007) note, there is no freely downloadable equivalent to the data on Ken French's US website, and this paper is directed at remedying this situation. We depart from the majority of previous UK studies (with the exception of Agarwal and Taffler, 2008) by forming portfolios on 30 th September each year, which we argue is more appropriate for the UK.Although we construct factors and portfolios for the UK, by extending tests to portfolios formed on differing bases, we add to the caution expressed in Michou, Mouselli and Stark (2007) on whether such factor models completely capture risk in the UK. Our recommendation is that any tests of long run abnormal returns in UK be based on characteristic-matched portfolios. The data underlying this paper can be downloaded from:

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Financial Distress, Market Anomalies and Single and Multifactor Asset Pricing Models: New Evidence

Cited by 19 publications

References 36 publications

Firms’ Degree of Internationalisation and the Cross-Section of Stock Returns: Evidence from Multinational Listed Companies in the U.K.

Firms’ Degree of Internationalisation and the Cross-Section of Stock Returns: Evidence from Multinational Listed Companies in the U.K.

Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK

The Fama-French and Momentum Portfolios and Factors in the UK

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