THE DETERMINANTS FOR STOCK RETURNS IN EMERGING MARKETS: THE CASE OF TAIWAN

Abstract

Whether the risk factors or firm characteristics cause the value premium of stocks still needs further investigation. This paper shows that the factor‐based models are significant but not sufficient for the stock returns in Taiwan. Size or book‐to‐market ratio alone cannot influence the stock returns under a factor‐based model. However, size along with book‐to‐market is significant under a factor‐based model. Furthermore, the risk characteristics are more influential than the factor load in stock return behavior. We conclude that employing only a factor‐based model or only risk characteristics will not consider some important content in stock returns.

We would like to thank C. Y. Chen, Wenchih Lee, two anonymous referees and the seminar participants at the 2000 FMA annual meeting for their helpful comments and encouragement. All of the remaining errors are our responsibility.

Citation

CHEN, A. and TU, E.H. (2002), "THE DETERMINANTS FOR STOCK RETURNS IN EMERGING MARKETS: THE CASE OF TAIWAN", Studies in Economics and Finance, Vol. 20 No. 2, pp. 58-77. https://doi.org/10.1108/eb028765