We use Australian data to test the Conditional Capital Asset Pricing Model (Jagannathan and Wang, 1996). Our results are generally supportive: the model performs well compared with a number of competing asset pricing models. In contrast to the study by Jagannathan and Wang, however, we find that...

Can Australian equity returns be modelled by 'home-grown' factors? We examine the indigenous capital asset pricing model, the indigenous Fama-French three-factor model, and extensions to the latter, and find them all wanting. We find evidence of domestic market segmentation in Australia. For the...

Durand "et al." (2006a) argue that the Australian market is both internationally integrated and domestically segmented. They find that the US-based three-factor model captures returns of the largest stocks in Australia (evidence of international integration), but that it is unable to account for...

Pettengill, Sundaram, and Mathur (1995) respond to the prima facie failure of the standard CAPM and propose a conditional beta model by segmenting the market into two states – up markets (where the market excess return rm–rf is positive) and down markets (where rm–rf is negative). We...