Working Paper: NBER ID: w4622
Authors: Wayne E. Ferson; Campbell R. Harvey
Abstract: This paper empirically examines multifactor asset pricing models for the returns and expected returns on eighteen national equity markets. The factors are chosen to measure global economic risks. Although previous studies do not reject the unconditional mean- variance efficiency of a world market portfolio, our evidence indicates that the tests are low in power, and the world market betas do not provide a good explanation of cross-sectional differences in average returns. Multiple beta models provide an improved explanation of the equity returns.
Keywords: Asset Pricing; Global Markets; Equity Returns
JEL Codes: G12; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global risk factors (F65) | equity market returns (G12) |
| world market portfolio (G15) | equity market returns (G12) |
| world equity index (G12) | average return premiums (G22) |
| exchange rate fluctuations (F31) | average return premiums (G22) |
| additional global risk factors (F65) | average pricing errors (P22) |
| multiple sources of risk (D81) | Japanese equity market returns (G12) |