Abstract
This chapter examines a multifactor model for stock returns in nine Asian markets (Japan, China, South Korea, Hong Kong, Taiwan, Singapore, Indonesia, Malaysia, and Thailand). The authors develop a model using the market risk premium, size, book-to-market, profitability, investment, momentum, price-to-earnings ratio, and dividend yield factors for each market. The empirical results suggest that this eight-factor model can better explain the variations of stock returns than the original Fama–French three-factor model. Factor-based models using local data outperform those using data from US markets. In addition, the evidence suggests that the eight-factor model can better explain stock returns when the market is under stress.
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