TY  - JOUR
AU  - Gharghori, P
AU  - Chan, H
AU  - Faff, R
Y2  - 2014/05/21
Y1  - 2007/12/01
SN  - 0312-8962
UR  - http://hdl.handle.net/11343/27937
AB  - 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.
LA  - English
PB  - UNIV NEW SOUTH WALES, AUSTR GRAD SCH MANAGEMENT
KW  - Banking
KW  - Finance and Investment
T1  - Are the Fama-French factors proxying default risk?
DO  - 10.1177/031289620703200204
IS  - Australian Journal of Management
VL  - 32
IS  - 2
SP  - 223-249
L1  - /bitstream/handle/11343/27937/255067_88802.pdf?sequence=1&isAllowed=n
ER  -