International Tests of the ZCAPM Asset Pricing Model

Kolari, Liu, and Huang (2021) recently proposed and empirically tested a new asset pricing model dubbed the ZCAPM that consistently outperformed popular multifactor models using U.S. stock returns. Is the ZCAPM a false discovery? As verification, this paper provides international stock return tests of the ZCAPM for Canada, France, Germany, Japan, the United Kingdom, and the United States. We find that out-of-sample cross-sectional tests corroborate their findings. The ZCAPM outperforms well-known three- and four-factor models in terms of both goodness-of-fit and factor loading significance. Graphical analyses of fitted versus realized excess returns strongly support the ZCAPM