Risk Factors for the Swiss Stock Market

Summary

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.

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Correspondence to Manuel Ammann.

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Michael Steiner is writing his doctoral thesis at the University of St. Gallen and works for Wegelin & Co. Private Bankers.

The authors would like to thank Hato Schmeiser, the participants of the “Topics in Finance”-seminar at the University of St. Gallen, and the anonymous referees for their valuable comments. An updated version of the monthly risk factors is available on www.ammannsteiner.ch.

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Ammann, M., Steiner, M. Risk Factors for the Swiss Stock Market. Swiss J Economics Statistics 144, 1–35 (2008). https://doi.org/10.1007/BF03399247

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Keywords

  • Fama French
  • Carhart
  • Risk factors
  • Value
  • Size
  • Momentum
  • Switzerland

JEL-Classification

  • G11
  • G12
  • G15