Are the Fama-French Factors Proxying Default Risk?
In this paper we investigate the contention that the Fama-French (1993) model's ability to explain cross-sectional variation in equity returns occurs because the Fama-French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the F...
Gespeichert in:
| Veröffentlicht in: | Australian journal of management 2007-12, Vol.32 (2), p.223-250 |
|---|---|
| Hauptverfasser: | , , |
| Format: | Artikel |
| Sprache: | eng |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| container_end_page | 250 |
|---|---|
| container_issue | 2 |
| container_start_page | 223 |
| container_title | Australian journal of management |
| container_volume | 32 |
| creator | Gharghori, Philip Chan, Howard Faff, Robert |
| description | In this paper we investigate the contention that the Fama-French (1993) model's ability to explain cross-sectional variation in equity returns occurs because the Fama-French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the Fama-French model with a default factor and run system regressions of the default enhanced models using the GMM approach. Our key findings are that: 1) default risk is not priced in equity returns; and, 2) the Fama-French factors are not proxying for default risk. Although our findings suggest that SMB and HML are not proxying for default risk, our analysis indicates that the Fama-French factors are capturing some form of priced risk. However, what type of risk the Fama-French factors are capturing remains an open question. |
| doi_str_mv | 10.1177/031289620703200204 |
| format | Article |
| fullrecord | <record><control><sourceid>proquest_sage_</sourceid><recordid>TN_cdi_sage_journals_10_1177_031289620703200204</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><informt_id>10.3316/informit.126977420147664</informt_id><sage_id>10.1177_031289620703200204</sage_id><sourcerecordid>1418106951</sourcerecordid><originalsourceid>FETCH-LOGICAL-c494t-2e0f4ae85f73ba83b78836763c6fd287aafb84ee0c39ef74d05990146ff62c33</originalsourceid><addsrcrecordid>eNqFkE9LAzEQxYMoWKtfwNPifW3-bbJ7kqJWxYIiPXgL2TTZpm43NUnBfnt3u0IFUU8zw3vvN8wAcI7gJUKcjyBBOC8YhhwSDCGG9AAMEME8xe1wCAadIe0cx-AkhCWECOMMDwAee53EhU4mciXTideNWrS9is6H5Nm7j61tquRGG7mpY_Jiw9vVKTgysg767KsOwWxyO7u-T6dPdw_X42mqaEFjijU0VOo8M5yUMiclz3PCOCOKmTnOuZSmzKnWUJFCG07nMCsKiCgzhmFFyBBc9Ni1d-8bHaJYuo1v2o2ivTCjrMhha8K9SXkXgtdGrL1dSb8VCIruM-LnZ9rQqA8FWek99c_Ea5_wKxuFcnWtVbSuCUsZgwhaerUQtjFupztfibmzQpY7KCGI7UWEWcE5xe2lnLEO_fgNLSsb1vFX4r-0T2q7mb4</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>200546980</pqid></control><display><type>article</type><title>Are the Fama-French Factors Proxying Default Risk?</title><source>Access via SAGE</source><source>EBSCOhost Business Source Complete</source><creator>Gharghori, Philip ; Chan, Howard ; Faff, Robert</creator><creatorcontrib>Gharghori, Philip ; Chan, Howard ; Faff, Robert</creatorcontrib><description>In this paper we investigate the contention that the Fama-French (1993) model's ability to explain cross-sectional variation in equity returns occurs because the Fama-French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the Fama-French model with a default factor and run system regressions of the default enhanced models using the GMM approach. Our key findings are that: 1) default risk is not priced in equity returns; and, 2) the Fama-French factors are not proxying for default risk. Although our findings suggest that SMB and HML are not proxying for default risk, our analysis indicates that the Fama-French factors are capturing some form of priced risk. However, what type of risk the Fama-French factors are capturing remains an open question.</description><identifier>ISSN: 0312-8962</identifier><identifier>EISSN: 1327-2020</identifier><identifier>DOI: 10.1177/031289620703200204</identifier><language>eng</language><publisher>London, England: SAGE Publications</publisher><subject>Capital assets ; Capital assets pricing model ; CAPM ; Default ; Default (Finance) ; Equity ; Fama-French model ; Hedging ; Hypotheses ; Mathematical models ; Prices ; Rates of return ; Regression analysis ; Risk assessment ; Risk management ; Stocks ; Studies</subject><ispartof>Australian journal of management, 2007-12, Vol.32 (2), p.223-250</ispartof><rights>Copyright Australian Graduate School of Management Dec 2007</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c494t-2e0f4ae85f73ba83b78836763c6fd287aafb84ee0c39ef74d05990146ff62c33</citedby><cites>FETCH-LOGICAL-c494t-2e0f4ae85f73ba83b78836763c6fd287aafb84ee0c39ef74d05990146ff62c33</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://journals.sagepub.com/doi/pdf/10.1177/031289620703200204$$EPDF$$P50$$Gsage$$H</linktopdf><linktohtml>$$Uhttps://journals.sagepub.com/doi/10.1177/031289620703200204$$EHTML$$P50$$Gsage$$H</linktohtml><link.rule.ids>314,780,784,21819,27924,27925,43621,43622</link.rule.ids></links><search><creatorcontrib>Gharghori, Philip</creatorcontrib><creatorcontrib>Chan, Howard</creatorcontrib><creatorcontrib>Faff, Robert</creatorcontrib><title>Are the Fama-French Factors Proxying Default Risk?</title><title>Australian journal of management</title><description>In this paper we investigate the contention that the Fama-French (1993) model's ability to explain cross-sectional variation in equity returns occurs because the Fama-French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the Fama-French model with a default factor and run system regressions of the default enhanced models using the GMM approach. Our key findings are that: 1) default risk is not priced in equity returns; and, 2) the Fama-French factors are not proxying for default risk. Although our findings suggest that SMB and HML are not proxying for default risk, our analysis indicates that the Fama-French factors are capturing some form of priced risk. However, what type of risk the Fama-French factors are capturing remains an open question.</description><subject>Capital assets</subject><subject>Capital assets pricing model</subject><subject>CAPM</subject><subject>Default</subject><subject>Default (Finance)</subject><subject>Equity</subject><subject>Fama-French model</subject><subject>Hedging</subject><subject>Hypotheses</subject><subject>Mathematical models</subject><subject>Prices</subject><subject>Rates of return</subject><subject>Regression analysis</subject><subject>Risk assessment</subject><subject>Risk management</subject><subject>Stocks</subject><subject>Studies</subject><issn>0312-8962</issn><issn>1327-2020</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2007</creationdate><recordtype>article</recordtype><sourceid>8G5</sourceid><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>AZQEC</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><sourceid>GNUQQ</sourceid><sourceid>GUQSH</sourceid><sourceid>M2O</sourceid><recordid>eNqFkE9LAzEQxYMoWKtfwNPifW3-bbJ7kqJWxYIiPXgL2TTZpm43NUnBfnt3u0IFUU8zw3vvN8wAcI7gJUKcjyBBOC8YhhwSDCGG9AAMEME8xe1wCAadIe0cx-AkhCWECOMMDwAee53EhU4mciXTideNWrS9is6H5Nm7j61tquRGG7mpY_Jiw9vVKTgysg767KsOwWxyO7u-T6dPdw_X42mqaEFjijU0VOo8M5yUMiclz3PCOCOKmTnOuZSmzKnWUJFCG07nMCsKiCgzhmFFyBBc9Ni1d-8bHaJYuo1v2o2ivTCjrMhha8K9SXkXgtdGrL1dSb8VCIruM-LnZ9rQqA8FWek99c_Ea5_wKxuFcnWtVbSuCUsZgwhaerUQtjFupztfibmzQpY7KCGI7UWEWcE5xe2lnLEO_fgNLSsb1vFX4r-0T2q7mb4</recordid><startdate>20071201</startdate><enddate>20071201</enddate><creator>Gharghori, Philip</creator><creator>Chan, Howard</creator><creator>Faff, Robert</creator><general>SAGE Publications</general><general>Sage Publications Ltd</general><scope>AAYXX</scope><scope>CITATION</scope><scope>0U~</scope><scope>1-H</scope><scope>3V.</scope><scope>4T-</scope><scope>7RO</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>87Z</scope><scope>8AI</scope><scope>8AO</scope><scope>8FK</scope><scope>8FL</scope><scope>8G5</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>AXJJW</scope><scope>AZQEC</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FREBS</scope><scope>FRNLG</scope><scope>F~G</scope><scope>GNUQQ</scope><scope>GUQSH</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>L.0</scope><scope>M0C</scope><scope>M2O</scope><scope>MBDVC</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>PRINS</scope><scope>Q9U</scope><scope>S0X</scope></search><sort><creationdate>20071201</creationdate><title>Are the Fama-French Factors Proxying Default Risk?</title><author>Gharghori, Philip ; Chan, Howard ; Faff, Robert</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c494t-2e0f4ae85f73ba83b78836763c6fd287aafb84ee0c39ef74d05990146ff62c33</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2007</creationdate><topic>Capital assets</topic><topic>Capital assets pricing model</topic><topic>CAPM</topic><topic>Default</topic><topic>Default (Finance)</topic><topic>Equity</topic><topic>Fama-French model</topic><topic>Hedging</topic><topic>Hypotheses</topic><topic>Mathematical models</topic><topic>Prices</topic><topic>Rates of return</topic><topic>Regression analysis</topic><topic>Risk assessment</topic><topic>Risk management</topic><topic>Stocks</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Gharghori, Philip</creatorcontrib><creatorcontrib>Chan, Howard</creatorcontrib><creatorcontrib>Faff, Robert</creatorcontrib><collection>CrossRef</collection><collection>Global News & ABI/Inform Professional</collection><collection>Trade PRO</collection><collection>ProQuest Central (Corporate)</collection><collection>Docstoc</collection><collection>Asian Business Database</collection><collection>Access via ABI/INFORM (ProQuest)</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>Asian Business Database (Alumni Edition)</collection><collection>ProQuest Pharma Collection</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>Research Library (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>Asian & European Business Collection</collection><collection>ProQuest Central Essentials</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>Asian & European Business Collection (Alumni)</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>ProQuest Central Student</collection><collection>Research Library Prep</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Professional Standard</collection><collection>ABI/INFORM Global</collection><collection>Research Library</collection><collection>Research Library (Corporate)</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central China</collection><collection>ProQuest Central Basic</collection><collection>SIRS Editorial</collection><jtitle>Australian journal of management</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Gharghori, Philip</au><au>Chan, Howard</au><au>Faff, Robert</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Are the Fama-French Factors Proxying Default Risk?</atitle><jtitle>Australian journal of management</jtitle><date>2007-12-01</date><risdate>2007</risdate><volume>32</volume><issue>2</issue><spage>223</spage><epage>250</epage><pages>223-250</pages><issn>0312-8962</issn><eissn>1327-2020</eissn><abstract>In this paper we investigate the contention that the Fama-French (1993) model's ability to explain cross-sectional variation in equity returns occurs because the Fama-French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the Fama-French model with a default factor and run system regressions of the default enhanced models using the GMM approach. Our key findings are that: 1) default risk is not priced in equity returns; and, 2) the Fama-French factors are not proxying for default risk. Although our findings suggest that SMB and HML are not proxying for default risk, our analysis indicates that the Fama-French factors are capturing some form of priced risk. However, what type of risk the Fama-French factors are capturing remains an open question.</abstract><cop>London, England</cop><pub>SAGE Publications</pub><doi>10.1177/031289620703200204</doi><tpages>28</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0312-8962 |
| ispartof | Australian journal of management, 2007-12, Vol.32 (2), p.223-250 |
| issn | 0312-8962 1327-2020 |
| language | eng |
| recordid | cdi_sage_journals_10_1177_031289620703200204 |
| source | Access via SAGE; EBSCOhost Business Source Complete |
| subjects | Capital assets Capital assets pricing model CAPM Default Default (Finance) Equity Fama-French model Hedging Hypotheses Mathematical models Prices Rates of return Regression analysis Risk assessment Risk management Stocks Studies |
| title | Are the Fama-French Factors Proxying Default Risk? |
| url | https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-01-02T00%3A33%3A04IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-proquest_sage_&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Are%20the%20Fama-French%20Factors%20Proxying%20Default%20Risk?&rft.jtitle=Australian%20journal%20of%20management&rft.au=Gharghori,%20Philip&rft.date=2007-12-01&rft.volume=32&rft.issue=2&rft.spage=223&rft.epage=250&rft.pages=223-250&rft.issn=0312-8962&rft.eissn=1327-2020&rft_id=info:doi/10.1177/031289620703200204&rft_dat=%3Cproquest_sage_%3E1418106951%3C/proquest_sage_%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=200546980&rft_id=info:pmid/&rft_informt_id=10.3316/informit.126977420147664&rft_sage_id=10.1177_031289620703200204&rfr_iscdi=true |