Determinants of the cross-sectional stock returns in Korea

Evaluating recent empirical evidence

Jaehoon Hahn, Heebin Yoon

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper provides empirical evaluation of recently proposed determinants of the cross-sectional stock returns in Korea, taking into account recent critique of empirical asset pricing literature such as the low power of test diagnostics and the bias induced by noise in prices. We do not find convincing empirical evidence supporting the Fama-French three-factor model as a benchmark asset pricing model for risk adjustment. In addition, empirical evidence indicates that the bias induced by noisy prices is substantial enough in mean returns of equal-weighted portfolios to change the economic and statistical significance of the estimated risk premium for factor portfolios, suggesting that researchers exercise caution in designing factor portfolios and interpreting results.

Original languageEnglish
Pages (from-to)88-106
Number of pages19
JournalPacific Basin Finance Journal
Volume38
DOIs
Publication statusPublished - 2016 Jun 1

Fingerprint

Stock returns
Korea
Empirical evidence
Factors
Benchmark
Economic significance
Asset pricing models
Risk adjustment
Exercise
Statistical significance
Fama-French three-factor model
Empirical asset pricing
Risk premium
Diagnostic tests
Empirical evaluation

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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Determinants of the cross-sectional stock returns in Korea : Evaluating recent empirical evidence. / Hahn, Jaehoon; Yoon, Heebin.

In: Pacific Basin Finance Journal, Vol. 38, 01.06.2016, p. 88-106.

Research output: Contribution to journalArticle

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