TY  - JOUR
AU  - Ferson,Wayne E.
AU  - Harvey,Campbell R.
TI  - Fundamental Determinants of National Equity Market Returns: A Perspective on Conditional Asset Pricing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5860
PY  - 1996
Y2  - December 1996
UR  - http://www.nber.org/papers/w5860
L1  - http://www.nber.org/papers/w5860.pdf
N1  - Author contact info:
Wayne E. Ferson
Department of Finance
and Business Economics
University of Southern California
3670 Trousdale Parkway Suite 308
Los Angeles, CA 90089-0804
Tel: 213/740-5615
Fax: 213/740-6650
E-Mail: ferson@marshall.usc.edu

Campbell R. Harvey
Duke University
Fuqua School of Business
Durham, NC 27708-0120
Tel: 919/660-7768
Fax: 919/660-8030
E-Mail: cam.harvey@duke.edu
AB  - This paper provides a global asset pricing perspective on the debate over the relation between predetermined attributes of common stocks, such as ratios of price-to-book-value, cash-flow, earnings, and other variables to the future returns.  Some argue that such variables may be used to find securities that are systematically undervalued by the market, while others argue that the measures are proxies for exposure to underlying economic risk factors.  It is not possible to distinguish between these views without explicitly modeling the relation between such attributes and risk factors.  We present an empirical framework for attacking the problem at a global level, assuming integrated markets.  Our perspective pulls together the traditional academic and practitioner viewpoints on lagged attributes.  We present new evidence on the relative importance of risk and mispricing effects, using monthly data for 21 national equity markets.  We find that the cross-sectional explanatory power of the lagged attributes is related to both risk and mispricing in the two-factor model than mispricing.
ER  -