The Cross-Section of German StockReturns: New Data and New Evidence

This paper serves two purposes. First, we introduce a new data set on the German stock marketwhich is publicly available to all researchers. It comprises factor returns (a market factor, asize factor, a book-to-market factor, and a momentum factor) as well as returns of portfolioswhich are single- and double-sorted according to beta, size, book-to-market, and momentum.Second, we use this data set to perform asset pricing tests for the German equity market.Specifically, we test the standard CAPM, the Fama-French three-factor model, and the Carhartfour-factor model. Our tests are based on a more comprehensive data set than earlier studiesand we investigate the sensitivity of the results to the choice of test assets. Our results indicatethat none of the models is able to consistently explain the cross-section of returns. They alsodemonstrate that the results of asset pricing tests are sensitive to the choice of test assets.