Economics & Finance / Finance & Investment / Stock & Capital Markets

Fama-French Factors: Global or Country-Specific? The 8.41% Mistake Costing Investors Billions

John M. Griffin

Think you can use a global asset pricing model for international stocks? Think again. This video breaks down a landmark 2002 study by John M. Griffin, published in the Review of Financial Studies, that shatters the assumption that Fama-French factors work globally. Using data from the US, Japan, UK, and Canada, Griffin reveals a shocking truth: using a global model instead of a country-specific one can lead to annual expected return errors of up to 8.41% for US stocks—and even higher for others. We'll walk through the evidence: why domestic factors dominate in explaining stock returns, why adding foreign factors actually hurts pricing accuracy, and how this affects real-world decisions like cost of capital estimation and portfolio evaluation. If you're an investor, analyst, or finance student, this is a must-watch to avoid costly mistakes. Discover why the research says: always go local, not global.