scholarly journals Investor Sentiments and Fama–French Five-Factor Premia

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110278
Author(s):  
Ume Habibah ◽  
Mujeeb-u-Rehman Bhayo ◽  
Muhammad Shahid Iqbal
Keyword(s):  
Risk Premium ◽  
Explanatory Power ◽  
Composite Index ◽  
Value Premium ◽  
Excess Return ◽  
Monthly Data ◽  
Market Risk Premium ◽  
Size Premium ◽  
Investor Sentiments ◽  
Profitability Premium

This study provides new insights to predict the excess return of a security. As if factor premia are getting influenced by the sentiments that means sentiments are ultimately affecting the excess return of a security. To meet the objective, a composite index developed by Baker and Wurgler is used as sentiment proxy. Monthly data are used from July 1965 to September 2015 in U.S. context. Granger casualty, Vector Autoregression (VAR), and Fama–Macbeth regression are applied to get the results. Results show that investor sentiments significantly drive the Fama factors’ premia: size premium and profitability premium. Sentiments also contain some information to explain the investment premia but fail to explain the market risk premium and value premium. Furthermore, results suggest that sentiments increase the explanatory power of model measured by R square. In short, this study suggests that investor sentiments play a role in explaining the Fama–French five-factor premia.

scholarly journals Factors of Stock Return and Carhart Model: The Case of Dhaka Stock Exchange (DSE) of Bangladesh

2019 ◽  
Vol 11 (6) ◽  
pp. 14
Author(s):  
Mohammad Akter Hossan ◽  
Mohammad Joynal Abedin
Keyword(s):  
Risk Premium ◽  
Stock Return ◽  
Stock Exchange ◽  
Market Value ◽  
Value Premium ◽  
Excess Return ◽  
Momentum Effect ◽  
Market Risk Premium ◽  
Price Momentum ◽  
Size Premium

The objective of this study is to find factors of stock return by testing validity of Carhart model in Dhaka Stock Exchange (DSE) of Bangladesh. For this purpose, this study uses monthly excess return of portfolios, size, book-to-market value, market return, and price momentum data of 109 sample firms to calculate return factors such as market risk premium, size premium (SMB), value premium (HML), and momentum effect (UMD) for the sample period of 2005 to 2014. Then a total of ten portfolios, six based on size and book-to-market value and four based on size and price momentum, are constructed in this study. Excess return of each of these portfolios are calculated and regressed on the above four factors. Results of this study reveal that in DSE, market risk premium is positively and significantly related with the excess return of all portfolios; Size premium is found positively and significantly related with the return of small size portfolios; Value premium is found negatively and significantly related with the returns of all portfolios except one big portfolio (B/H); momentum effect is found positively and significantly related to the excess return of up (U), big (B), and small (S) size portfolios. It is also evident from R2 value, F statistic, and robustness test of this study that four-factor model is valid and it can predict portfolio returns accurately when there is no abnormality such as market crash occurs in DSE.

scholarly journals Trading Volume and Fama-French Three Factor Model on Excess Return. Empirical Evidence from Nairobi Security Exchange

2018 ◽  
Vol 14 (22) ◽  
pp. 276
Author(s):  
Opuodho Gordon Ochere ◽  
Nasieku M. Tabitha ◽  
Olweny Tobias O
Keyword(s):  
Trading Volume ◽  
Quantitative Research ◽  
Factor Model ◽  
Explanatory Power ◽  
Unit Root Test ◽  
Secondary Data ◽  
Excess Return ◽  
Size Premium ◽  
Market Premium ◽  
Three Factor

The main objective of this paper is to examine the effect of Trading Volume on excess return using the Fama-French three factor model of listed companies in Kenya. The research study employed a Quantitative research design to analyses the effect of Trading Volume on excess returns in Nairobi Security Exchange (NSE) during the period 2006 to 2015. Secondary data was used for this study. The study utilized descriptive statistics, correlation, unit root test, Heteroscedasticity, and Autocorrelation test as diagnostic tests. The regression results revealed that Market premium and Value premium (HML) and Trading Volume have a high explanatory power while the size premium (SMB) has a low explanatory power.

scholarly journals DEFAULT RISK PREMIUM AND EQUITY RETURN OF NON-FINANCIAL COMPANIES OF PAKISTAN

2017 ◽  
Vol 5 (1) ◽  
pp. 64-76
Author(s):  
Sadaf Adalat
Keyword(s):  
Risk Premium ◽  
Default Risk ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Weighted Average ◽  
Equity Returns ◽  
Investment Strategies ◽  
Size Premium ◽  
Fama And French ◽  
Market Premium

The current study was aimed to examine the relationship between default risk premium and equity return by using sample of hundred companies from period between 2000 and 2015, listed at Karachi Stock Exchange. The firms are chosen on the basis of market capitalization. To examine the role of market premium, size premium, value premium and default premium in estimating the equity returns, the two pass regression was used. It was found that CAPM is valid model as market premium is priced but explanatory power is low. Similarly, the findings suggested that the CAPM model is not better than Fama and French model. Default risk premium is also significantly influencing equity returns. The study findings provided evidence about premium of default risk anomaly in Pakistani markets during the sample period. In default sorted portfolio the low default stocks earn lower than the high default stocks. This study has implications for decision markers in estimating cost of equity as well as weighted average cost of capital as it provides more information in comparison to CAPM. Moreover, information about premium of size, value and default anomaly may facilitate under developing investment strategies.

scholarly journals KOMPARASI CAPITAL ASSET PRICING MODEL DAN FAMA-FRENCH THREE FACTOR MODEL DALAM MEMPREDIKSI RETURN SAHAM

2018 ◽  
pp. 747
Author(s):  
Ni Putu Desy Ratna Dewi ◽  
I Wayan Suartana
Keyword(s):  
Asset Pricing ◽  
Risk Premium ◽  
Factor Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Market Risk Premium ◽  
Asset Pricing Model ◽  
Size Premium ◽  
Market Premium

Tujuan dari penelitian ini adalah untuk membandingkan kemampuan CAPM dan FF3FM dalam memprediksi return saham di Bursa Efek Indonesia.  Populasi dalam penelitian ini adalah perusahaan-perusahaan terdaftar di Bursa Efek Indonesia yang termasuk dalam kelompok saham Indeks Kompas 100 pada periode 2012-2016. Hasil penelitian menunjukkan bahwa variabel market risk premium berpengaruh positif terhadap return pada enam portofolio yang dibentuk dalam CAPM dan FF3FM. Variabel size premium berpengaruh positif pada return portofolio S/H, S/M, dan S/L dan berpengaruh negatif pada return portofolio B/H, B/M, dan B/L. Variabel book to market premium berpengaruh positif pada return portofolio B/H, S/H, dan S/M dan berpengaruh negatif pada return portofolio B/L dan S/L. Sedangkan variabel book to market premium tidak berpengaruh pada return portofolio B/M. Nilai adjusted R square CAPM dan FF3FM menunjukkan bahwa kemampuan FF3FM lebih baik dalam menjelaskan return dibandingkan CAPM.

The Cross Section of Expected Returns with MIDAS Betas

2011 ◽  
Vol 47 (1) ◽  
pp. 115-135 ◽  
Author(s):  
Mariano González ◽  
Juan Nave ◽  
Gonzalo Rubio
Keyword(s):  
Cross Section ◽  
Risk Premium ◽  
Market Risk ◽  
Ordinary Least Squares ◽  
Mixed Data ◽  
Expected Returns ◽  
Data Sampling ◽  
Cross Sectional ◽  
Market Risk Premium ◽  
The Cross

AbstractThis paper explores the cross-sectional variation of expected returns for a large cross section of industry and size/book-to-market portfolios. We employ mixed data sampling (MIDAS) to estimate a portfolio’s conditional beta with the market and with alternative risk factors and innovations to well-known macroeconomic variables. The market risk premium is positive and significant, and the result is robust to alternative asset pricing specifications and model misspecification. However, the traditional 2-pass ordinary least squares (OLS) cross-sectional regressions produce an estimate of the market risk premium that is negative, and significantly different from 0. Using alternative procedures, we compare both beta estimators. We conclude that beta estimates under MIDAS present lower mean absolute forecasting errors and generate better out-of-sample performance of the optimized portfolios relative to OLS betas.

Sign in / Sign up

Export Citation Format

Share Document