In this paper we investigate the explanatory power of the market beta, firm size, and the book-to-market ratio, as well as Value-at-Risk regarding the cross-sectional expected stock returns in a less developed stock market – Taiwan's stock market. The main purpose is to examine whether the Value-at-Risk factor has marginal explanatory power related to the Fama-French three-factor model. The empirical results show that Value-at-Risk can account for the average stock returns at both 1% and 5% significance levels based on cross-sectional regression analysis. Moreover, from the perspective of the time series regression, the Value-at-Risk factor can also demonstrate the variation of the stock market, especially for the larger companies in the Taiwan stock market.
Chen, D.-H., Chen, C.-D., & Wu, S.-C. (2014). VaR and the cross-section of expected stock returns: an emerging market evidence. Journal of Business Economics and Management, 15(3), 441-459. https://doi.org/10.3846/16111699.2012.744343
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