TY - JOUR
T1 - Do zero-cost portfolios have the ability to predict economic growth? Evidence from Hong Kong, South Korea and Taiwan
AU - Davison, Freddy
AU - Marsden, Alastair
AU - Veeraraghavan, Madhu
PY - 2008/12
Y1 - 2008/12
N2 - In this paper we investigate the relationship between growth in future Gross Domestic Product (GDP) and Industrial Production (IDP) and the performance of SMB (small stocks minus big stocks) and HML (High book-to-market stocks minus low book-to-market stocks) portfolios for equities listed in Hong Kong, South Korea and Taiwan. We find evidence to suggest that: (a) the excess market return is positively related to future GDP or IDP growth in South Korea and Taiwan; (b) contrary to most European markets, Australia, Japan and the US, future economic growth is in general significantly negatively related to SMB in Hong Kong and South Korea; and, (c) a negative relationship between future economic growth and HML for Hong Kong. Our results cast doubt if SMB and HML portfolios are positive risk factors in the Fama and French (Fama, E. F., and French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3-56) three-factor asset pricing model for Hong Kong, South Korea and Taiwan.
AB - In this paper we investigate the relationship between growth in future Gross Domestic Product (GDP) and Industrial Production (IDP) and the performance of SMB (small stocks minus big stocks) and HML (High book-to-market stocks minus low book-to-market stocks) portfolios for equities listed in Hong Kong, South Korea and Taiwan. We find evidence to suggest that: (a) the excess market return is positively related to future GDP or IDP growth in South Korea and Taiwan; (b) contrary to most European markets, Australia, Japan and the US, future economic growth is in general significantly negatively related to SMB in Hong Kong and South Korea; and, (c) a negative relationship between future economic growth and HML for Hong Kong. Our results cast doubt if SMB and HML portfolios are positive risk factors in the Fama and French (Fama, E. F., and French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3-56) three-factor asset pricing model for Hong Kong, South Korea and Taiwan.
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U2 - 10.1016/j.irfa.2008.07.001
DO - 10.1016/j.irfa.2008.07.001
M3 - Article
AN - SCOPUS:54849431769
SN - 1057-5219
VL - 17
SP - 1012
EP - 1028
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
IS - 5
ER -
