International tests of the ZCAPM asset pricing model

Kolari, Liu, and Huang (2021) recently proposed and empirically tested a new asset pricing model dubbed that ZCAPM that consistently outperformed popular multifactor models using U.S. stock returns. Is the ZCAPM a false discovery? This paper provides international tests of the ZCAPM for Canada, France, Germany, Japan, United Kingdom, and United States. Out-of-sample cross-sectional tests indicate that: (1) the goodness-of-fit of the ZCAPM is substantially higher than the CAPM and widely-used three- and four-factor models; and (2) factor loadings associated with return dispersion in the ZCAPM are more consistently and highly significant than factors in other models across different countries.