Date of this Version


Document Type

Journal Article

Publication Details

Submitted Version.

Brailsford, T., Gaunt, C., & O'Brien, M. A. (2012). Size and book-to-market factors in Australia. Australian journal of management, Online first, 1-22.

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© Copyright The Authors, 2011




There is continuing debate in the asset pricing literature as to the acceptance of the Fama-French three-factor model. While this model has received strong empirical support from tests in the US equity market, tests of the model in the Australian market have yielded inconclusive findings, particularly in respect of the HML factor. Prior research in Australia has suffered from limited datasets in respect of the accounting variables, and previous results vary with the scope of the dataset employed. Our study provides two advances. First, the study utilises a purpose-built dataset spanning 25 years and 98% of all listed firms. Second, the study employs a more appropriate portfolio construction method than that employed in prior studies. With these advances, the study is more able to test the three-factor model against the CAPM. The findings support the superiority of the Fama-French model, and for the first time align the research in this area between Australia and the USA.

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This document has been peer reviewed.