Concluding Remarks

ZusammenfassungDespite being of fundamental economic and scientific importance, international financial markets have remained considerably underresearched until today. This thesis presents three essays on empirical asset pricing in international equity markets. In the first essay, the role of firm-specific characteristics is analyzed for the momentum effect to exist. The second essay investigates the validity, persistence, and robustness of the newly discovered capital share growth factor across international markets as proposed by Lettau et al. (2019) for the U.S. market.

Multifactor Models and Their Consistency with the APT

We examine the consistency of several prominent multifactor models from the empirical asset pricing literature with the arbitrage pricing theory (APT) framework. We follow the APT-related literature and estimate the common factor structure from a rich cross-section (associated with 42 major CAPM anomalies) by employing the asymptotic principal components method. Our benchmark model contains six statistical factors and clearly dominates, in both economic and statistical terms, most of the empirical multifactor models proposed in the literature by a good margin. These results represent a critical challenge to the current workhorse models in terms of explaining large-scale equity risk premiums.