Comparing competing factor and characteristics models: Evidence in Japan

Pin Huang Chou, Kuan Cheng Ko, S. Ghon Rhee

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


The main purpose of this study is to simultaneously compare the explanatory abilities of various firm characteristics and factor models in the Japanese stock market. We show that the factor models developed by Fama and French (1993, 2015, 2018), Carhart (1997), and Hou et al. (2015) all fail to be priced in Japan. In addition, value and operating profitability anomalies are prevalent in Japan, while size, investment, and momentum effects are not. Our findings are in line with what is indicated in the existing literature: the characteristics model associated with value and operating profitability better describes the cross-sectional variations of stock returns than factor models in Japan.

Original languageEnglish
Article number102179
JournalPacific Basin Finance Journal
StatePublished - Dec 2023


  • Asset pricing anomalies
  • Asset pricing models
  • Errors-in-variables bias
  • Instrumental variables
  • Japanese market


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