infonet-economy

The four risk factors controlling for the market, size, value, and momentum effect have become a state-of-the-art framework for various applications in financial markets research. However, previous work shows that these broadly recognized risk factors are country-specific. For these reasons, this paper develops and analyses these factors for the Swiss stock market from January 1990 to December 2005, building on a high quality dataset and taking into account specific characteristics of the Swiss stock market. We find a negative size premium of -0.67% p.a. and a positive value premium of 2.35% p.a. Both, however, show a time-varying character. The momentum effect is the most pronounced with a premium of 10.33% p.a. The results are robust and validated by a comparison to data from the US. Furthermore, we find that the explanatory power of the factors is high, confirming their relevance to the Swiss stock market.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088379