scholarly journals Testing the overreaction hypothesis in the mexican stock market

2019 ◽  
Vol 65 (1) ◽  
pp. 153
Author(s):  
Jaime González Maiz Jiménez ◽  
Edgar Ortiz Calisto
Keyword(s):  
Stock Market ◽  
Factor Model ◽  
Monthly Data ◽  
Car Model ◽  
Overreaction Hypothesis ◽  
Fama And French ◽  
Capm Model ◽  
Three Factor ◽  
Loser Portfolio

<p>The objective of this work is to test the overreaction hypothesis in the Mexican Stock Market for the period of 2002-2015, using monthly data and applying the Cumulative Average Residuals (CAR) methodology via the CAPM model and the three-factor model proposed by Fama and French. The CAR model is applied to test how winner and loser portfolios perform during the period under analysis. Overall, the evidence shows that average CAR for the loser portfolio is 0.706%, whereas CAR for the winner portfolio is 0.364%, and that are statistically different; nevertheless, both portfolios are co-integrated. This research contributes to the financial literature identifying overreaction in the Mexican Stock Market during the period examined.</p>

scholarly journals MULTIFACTOR ASSET PRICING ANALYSIS OF THE BALTIC STOCK MARKET

Ekonomika ◽  
2010 ◽  
Vol 89 (4) ◽  
pp. 85-95 ◽  
Author(s):  
Raimonds Lieksnis
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Factor Model ◽  
Stock Market Index ◽  
Cross Sectional ◽  
Economic Significance ◽  
Market Index ◽  
Fama And French ◽  
The Baltic ◽  
Three Factor

This study investigates whether the Fama–French three-factor asset pricing model is applicable for explaining cross-sectional returns of stocks listed in the Baltic stock exchanges. Findings confirm the validity and economic significance of the three-factor model for the Baltic stock market: only investors who chose to invest in value stocks during the reference period achieved positive returns by matching or beating the returns of the stock market index. The monthly returns of 8 Latvian, 13 Estonian and 27 Lithuanian company stocks are analyzed for the time period from June 2002 till February 2010 by the methodology presented in Davis, Fama, and French (2000). Cross-sectional multivariate regression is calculated with stock portfolios representing the book-to-market and capitalization of companies as independent variables along with the stock market index. The study concludes that these three factors in the three-factor model are statistically significant, but, in line with earlier studies, regression intercepts are significantly different from zero and the model is not statistically confirmed.p>

scholarly journals A Comparative Study between the Fama and French Three-Factor Model and the Fama and French Five-Factor Model: Evidence from the Egyptian Stock Market

2019 ◽  
Vol 12 (1) ◽  
pp. 52 ◽  
Author(s):  
Nada S. Ragab ◽  
Rabab K. Abdou ◽  
Ahmed M. Sakr
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Factor Model ◽  
Five Factor Model ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
Time Period ◽  
Model Evidence ◽  
Fama And French ◽  
Three Factor

The focus of this paper is to test whether the Fama and French three-factor and five factor models can capture the variations of returns in the Egyptian stock market as one of the growing emerging markets over the time-period July 2005 to June 2016. To achieve this aim, following Fama and French (2015), the authors construct the Fama and French factors and three sets of test portfolios which are: 10 portfolios double-sorted on size and the BE/ME ratio, 10 portfolios double-sorted on size and operating profitability, and 10 portfolios double-sorted on size and investment for the Egyptian stock market. Using time-series regressions and the GRS test, the results show that although both models cannot be rejected as valid asset pricing models when applied to portfolios double-sorted on size and the BE/ME ratio, they still leave substantial variations in returns unexplained given their low adjusted R2 values. Similarly, when the two models are applied to portfolios double-sorted on size and investment, the results of the GRS test show that both models cannot be rejected. However, when the two models are applied to portfolios double-sorted on size and operating profitability, the results of the GRS test show that both models are strongly rejected which imply that both models leave substantial variations in returns related to size and profitability unexplained. Specifically, the biggest challenge to the two models is the big portfolio with weak profitability which generate a significantly negative intercept implying that the models overestimate its return.

Who is King in Factor Zoo? Case of the Chinese Stock Market

2020 ◽  
Vol 14 (2) ◽  
pp. 77-102
Author(s):  
Simon M. S. So
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Stock Returns ◽  
Factor Model ◽  
Five Factor Model ◽  
Investment Strategy ◽  
Capital Asset Pricing ◽  
Chinese Stock Market ◽  
Fama And French ◽  
Three Factor

This paper aimed to evaluate and compare individual performances and contributions of seven well-known factors, selected from four widely cited asset pricing models: (1) the capital asset pricing model of Sharpe (1964), (2) the three-factor model of Fama and French (1993) the augmented four-factor model of Carhart (1997), (3) the five-factor model of Fama and French (2015), and (4) the illiquidity model of Amihud, et al. (2015) in capturing the time-series variation of stock returns and absorbing the 12 prominent anomalies. The anomalies were constructed by forming long-short portfolios, and regressions were run to examine their monthly returns from 2000 to 2019. We found that there is no definite and absolute “king” in the factor zoo in the Chinese stock market, and size is the relative “king” that can absorb the maximum number of anomalies. Evidence also indicates that the three-factor model of Fama and French may still play an important role in pricing assets in the Chinese stock market. The results can provide investors with a reliable risk factor and help investors form an effective investment strategy. This paper contributes to asset pricing literature in the Chinese market.G1

scholarly journals An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

2015 ◽  
Vol 7 (12) ◽  
pp. 11
Author(s):  
Ramzi Boussaidi
Keyword(s):  
Stock Market ◽  
Size Effect ◽  
Factor Model ◽  
Investor Sentiment ◽  
Market Risk ◽  
Behavioral Approach ◽  
Rational Approach ◽  
Market Effect ◽  
Fama And French ◽  
Three Factor

This paper aims to investigate the behavioral and the rational explanations for the contrarian profits in the Tunisian stock market. We use the CAPM and the three-factor model of Fama and French (1993, 1996) to examine the rational explanations including the market risk, the size effect and the book to market effect. Behavioral explanations include the overconfidence bias and the investor sentiment. We use the decomposition of the trading volume advanced by Chuang and Lee (2006) to extract the factor reflecting the investor overconfidence and the ARMS index to measure the investor sentiment. These two variables are included in the three-factor model of Fama and French (1993, 1996) in an attempt to confront the rational approach with the behavioral approach. The results indicate that the contrarian profits on the Tunisian stock market are explained by the market risk, the size effect and the Book to Market effect; and that once adjusted for these three risk factors, they disappear. However, only the factor reflecting overconfidence among the two behavioral factors seems to play a role in explaining these abnormal returns.

PERBANDINGAN FAMA AND FRENCH THREE FACTOR . MODEL DENGAN CAPITAL ASSET PHCING MODEL

2008 ◽  
Vol 4 (2) ◽  
pp. 132
Author(s):  
Dede Irawan Saputra ◽  
Umi Murtini
Keyword(s):  
Factor Model ◽  
Market Size ◽  
Capital Asset ◽  
Fama And French ◽  
Three Factor

Penelitian ini bertujuan untuk menguji kemompuon Fama and Freneh three factor model dalom menjelaskan retum jortofolio dibandingkan dengan CAPM. Data yang digmakm pda penelitiot ini adatah d*a sekunder dari perusahaan yang masuk dalam LQ-45 dari periede Februari 2000 sampai Juli 2007- Sampel yang digunakan adaleh perusahaan yang selalu masuk datam Lg-45 selona periode penelitian- Hasil penelitian menwtjukkan batma betdasukmtnilai adjusted P dapat disimpulkan bahwa CAPM lebih mampu menjelaskot return partofolia dibandingkan dengan Fama and French three factor model Hal ini dryot dilihat dari nilai adjusted N CAPM yang lebih besar dibanding nilai adjusted,F Fama and Frqnch three factor modelKeywords: z Market, Size, BEIME, dan Adjusted R2

Applying the Fama and French three-factor model to analyze risk/reward in the Spanish REITs: an ARDL approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhenyu Su ◽  
Paloma Taltavull
Keyword(s):  
Growth Rate ◽  
Factor Model ◽  
Explanatory Power ◽  
Gdp Growth ◽  
Size Factor ◽  
Content Type ◽  
Gdp Growth Rate ◽  
Fama And French ◽  
Three Factor

Purpose This paper aims to analyse the risk and excess returns of the Spanish real estate investment trusts (S-REITs) using various methods, though focusing primarily on the Fama-French three-factor (FF3) model, over the period from 2007Q3 to 2017Q2. Design/methodology/approach The autoregressive distributed lag model is used for the empirical analysis to test long-term stable relationships between variables. Findings The findings indicate that the FF3 model is suitable for the S-REITs market, better explaining the S-REITs’ returns variation than the traditional single-index capital asset pricing model (CAPM) and the Carhart four-factor model. The empirical evidence is reasonably consistent with the FF3 model; the values for the market, size and value are highly statistically significant over the analysis period, with 68.7% variation in S-REITs’ returns explained by the model. In the long run, the market factor has less explanatory power than the size and value factors; the positive long-term multiplier of the size factor indicates that small S-REIT companies have higher returns, along with higher risk, while the negative multiplier of the value indicator suggests that S-REITs portfolios prefer to allocate growth REITs with low book-to-market ratios. The empirical findings from a modified FF3 model, which additionally incorporates Spain’s gross domestic product (GDP) growth rate, two consumer price index (CPI) macro-factors and three dummy variables, indicates that GDP growth rate and CPI also affect S-REITs’ yields, while investment funds with capital calls have a small influence on S-REITs’ returns. Practical implications The regression results of the standard and extended FF3 model can help researchers understand S-REITs’ risk and return through a general stock pattern. Potential investors are given more information to consider the new Spanish investment vehicle before making a decision. Originality/value The paper uses standard techniques but applies them for the first time to the S-REIT market.

Sign in / Sign up

Export Citation Format

Share Document