Does Five-Factor Model Perform Better Than Three Factor Model? Evidence from Developed Countries of The Asia Pacific Region

2021 ◽  
Vol 3 (2) ◽  
pp. 119-132
Author(s):  
Ume Salma Akbar ◽  
Niaz Ahmed Bhutto ◽  
Suresh Kumar Oad Rajput
Keyword(s):  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Developed Countries ◽  
Asia Pacific ◽  
Size Factor ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Three Factor ◽  
Better Than

This study evaluates whether the “Fama-French five-factor model” can explain the variations in expected returns better than the “three-factor model.” Using the stock returns and accounting variable data from DataStream for 1,300 plus listed firms across six developed countries of the Asia Pacific region, including; Australia, Hong Kong, Japan, Israel, New Zealand, and Singapore for the period of Jun-2006 to February-2020. The paper is the first to examine the “five-factor model” performance across the developed countries of the Asia Pacific region. The empirical findings reveal that the Asia Pacific region for the sample period earns an equity premium. In addition, results report the redundancy of size factor (SMB) and value factor (HML), while the profitability (RMW) and investment premium (CMA) are positive and significant. Moreover, the study used Gibbons, Ross, and Shanken (GRS) test to the asset pricing model. The GRS test results on the “five-factor model” compared with the “three-factor model” demonstrate that profitability and investment factors add significant explanatory power to the analysis in the Asia Pacific region.

scholarly journals Choosing Factors for the Vietnamese Stock Market

2021 ◽  
Vol 14 (3) ◽  
pp. 96
Author(s):  
Nina Ryan ◽  
Xinfeng Ruan ◽  
Jin E. Zhang ◽  
Jing A. Zhang
Keyword(s):  
Stock Returns ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Factor Models ◽  
Marginal Contribution ◽  
Return On Equity ◽  
Factor Modeling ◽  
Three Factor ◽  
Better Than

In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.

scholarly journals Role of leverage and liquidity risk in asset pricing: evidence from Indian stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mehak Jain ◽  
Ravi Singla
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Liquidity Risk ◽  
Pricing Models ◽  
Content Type ◽  
Asset Pricing Models ◽  
Three Factor ◽  
Better Than

Purpose Asset pricing revolves around the core aspects of risk and expected return. The main objective of the study is to test different asset pricing models for the Indian securities market. This paper aims to analyse whether leverage and liquidity augmented five-factor model performs better than Capital Asset Pricing Model (CAPM), Fama and French three-factor model, leverage augmented four-factor model and liquidity augmented four-factor model. Design/methodology/approach The data for the current study comprises records on prices of securities that are part of the Nifty 500 index for a time frame of 14 years, that is, from October 2004 to September 2017 consisting of 183 companies using time series regression. Findings The results indicate that the five-factor model performs better than CAPM and the three-factor model. The model outperforms leverage augmented and liquidity augmented four-factor models. The empirical evidence shows that the five-factor model has the highest explanatory power among the entire asset pricing models considered. Practical implications The present study bears certain useful implications for various stakeholders including fund managers, investors and academicians. Originality/value This study presents a five-factor model containing two additional factors, that is, leverage and liquidity risk along with the Fama-French three-factor model. These factors are expected to give more value to the model in comparison to the Fama-French three-factor model.

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.

Teacher Education and Inclusion in the Asia-Pacific Region

2019 ◽  
Author(s):  
Chris Forlin
Keyword(s):  
Teacher Education ◽  
Inclusive Education ◽  
Teacher Educators ◽  
Developed Countries ◽  
Asia Pacific ◽  
Strong Impact ◽  
Effective Teacher ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Individual Country

While countries across the Asia-Pacific region have since the early 2000s been very forthright in acknowledging the international conventions and declarations that promote inclusive education, there still seems to be a substantial gap between policy and school expectations in most educational systems. Many of the less developed countries have adopted the terminology in the Education For All framework and applied this within their own education policies. Thus, country policies promote an “inclusive approach to education” that enable children with disabilities to attend a regular school. Some policies go further and state that this should be with appropriate differentiation and support. Unfortunately, this is where the strength of the shift in education seems to end for many of the Asia-Pacific countries. There appears to be an ongoing lack of understanding that inclusion means that not all students will achieve through the “same old” ways and that outcomes will need to be different. In other words, governments promote inclusion through policy, but at the same time continue to expect schools to help all students to achieve the same curriculum, pedagogy, and assessment as the way to equity. Countries across the Asia-Pacific region, like elsewhere, vary enormously in their cultural diversity and in their ability to respond to inclusion. Models of teacher education, likewise, will vary and must be focused on what is contextually viable and culturally acceptable within each individual country. Cultural differences, beliefs, values, and understandings associated with inclusion and disability vary enormously across the Asia-Pacific region and are often firmly embedded within historical contexts. These invariably have strong impact on acceptance and in decision-making regarding what constitutes appropriate teacher preparation for working in more inclusive schools. Regardless of context, effective teacher education requires skilled teacher educators who have received full training in regard to inclusion and who are also aware of the needs of classroom teachers when asked to operate an inclusive classroom, within different cultural contexts, and the potential additional strains of large class sizes, and often limited resources. A variety of different models have been applied throughout the Asia-Pacific region to prepare teachers for inclusion with inconsistent outcomes.

Quality of financial reporting in the Asia-Pacific region

2016 ◽  
Vol 26 (4) ◽  
pp. 543-560 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Irfan Ahmed
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Developed Countries ◽  
The Philippines ◽  
Asia Pacific ◽  
Financial Reporting Quality ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Content Type

Purpose The main purpose of this paper is to examine the causes and interrelations between ownership composition and financial reporting quality of firms in the Asia-Pacific region. Design/methodology/approach The study uses panel data for 420 firms for the period 2011-2013 (three years) from Australia, Singapore, Malaysia, the Philippines and Pakistan. Findings Overall, the authors find that ownership concentration is positively associated with the financial reporting quality. However, institutional ownership and foreign ownership are positively associated with financial disclosure in developing countries. Further, the result indicates that institutional and public ownership is positively associated with financial reporting in developed countries. Among the control variables, the authors find that larger firms are negatively correlated with financial reporting quality in Asia-Pacific. Originality/value These results highlight the highly individualized effects of blockholders and the need for research to further understand the mechanisms through which shareholders impact financial reporting quality.

scholarly journals Investigating the Energy-Environmental Kuznets Curve Hypothesis for the Asia-Pacific Region

2019 ◽  
Vol 11 (8) ◽  
pp. 2395 ◽  
Author(s):  
Kentaka Aruga
Keyword(s):  
Energy Consumption ◽  
Environmental Kuznets Curve ◽  
Developed Countries ◽  
High Income ◽  
Asia Pacific ◽  
Kuznets Curve ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Income Groups ◽  
The Developed Countries

As mitigating the effects of energy consumption on the environment is a crucial issue for the Asia-Pacific region, this study investigates the energy-environmental Kuznets curve (EEKC) hypothesis among the 19 Asia-Pacific countries. The study also tests the EEKC hypothesis for the low-, middle-, and high-income groups of the region. The panel regression and cointegration models are used for this purpose. Our test results of both models suggest that the EEKC hypothesis holds for the whole Asia-Pacific region. However, the test performed on the three different income groups revealed that the hypothesis only holds for the high-income group. The hypothesis was not apparent for the low- and middle-income groups. This indicates that the transition in the energy consumption along the EEKC is only occurring in the developed countries of the Asia-Pacific region and the developed countries need to support the developing countries to achieve economic growth along the EEKC.

Brian Herbert Kay 1944–2017

2018 ◽  
Vol 29 (1) ◽  
pp. 36
Author(s):  
Michael F. Good ◽  
Scott A. Ritchie ◽  
Darryl McGinn ◽  
Richard C. Russell
Keyword(s):  
Public Health ◽  
Well Being ◽  
Asia Pacific ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
The World ◽  
History Of ◽  
Young Researchers ◽  
Better Than ◽  
Scientific Achievements

Brian Kaywas a renowned entomologist and arbovirologistwhoworked in academia and with local and international governments to make major and lasting improvements in public health. Particular highlights were the first ever elimination of a saltmarsh mosquito in the world and elimination of dengue from many hamlets and villages in Vietnam. He is also remembered for the development of the careers of many young researchers in Australia and overseas. When thinking of Brian Kay, three things come to mind immediately. First, Brian was a great character–a man of fun and passion and always good to be around. He had a great cheeky smile. Second, Brian was deeply committed to the careers and well-being of those around him–exemplified no better than how he acted so caringly for the Queensland Institute of Medical Research (QIMR) staff when he served for several years as Chairman of the QIMR Staff Association; and third, Brian was an outstanding entomologist, biologist, scientist. Here, we give a little history of his background and attempt to distil a few of Brian's many scientific achievements and paint a picture of a man who was greatly admired and loved by those who worked alongside him in various parts of the world, but predominantly in Australia and the Asia Pacific Region.

scholarly journals Health technology assessment in the Asia Pacific region

2009 ◽  
Vol 25 (S1) ◽  
pp. 196-201 ◽  
Author(s):  
Sadasivan Sivalal
Keyword(s):  
Health Technology Assessment ◽  
Technology Assessment ◽  
Health Technology ◽  
Developed Countries ◽  
Asia Pacific ◽  
World Population ◽  
Pacific Region ◽  
Kuala Lumpur ◽  
Asia Pacific Region ◽  
Building Capacity

Objectives:Although health technology assessment (HTA) has been well established in all developed countries, it has not found a firm footing in many developing countries. This is especially true of the Asia Pacific region, which has much of the world population.Methods:The beginnings of HTA in this region go back to the work of Dr. David Banta in China and the establishment of the Asian HTA Network. The Network embarked on increasing awareness and building capacity among personnel from the region. Attempts were made to introduce HTA in countries where it did not exist, as well as to strengthen existing HTA programs. The Network had regular meetings, and also carried out a study on the diffusion and utilization of magnetic resonance imaging in the region. In an attempt to boost the efforts of the Network, the author spearheaded the organization of the Asian Regional HTA Conferences in Kuala Lumpur in 2000 and 2003, and in Manila, Philippines, in 2004. In addition, the author carried out a survey on HTA in the region. There are two broad categories of countries in the region: Australia, Malaysia, Singapore, New Zealand, China, Philippines, Korea, Thailand, and Taiwan, which have formal HTA programs, and others for which informal mechanisms or related activities exist, which include Bangladesh, Bhutan, Brunei, Cambodia, India, Indonesia, Laos, Maldives, Mongolia, Nepal, Pakistan, Sri Lanka, and Vietnam.Results:It is important that once HTA is established, it is used effectively. Perseverance and dedication is needed to ensure the success of an HTA program.Conclusion:Some countries in the region have effective HTA programs, whereas in some, efforts are being made to establish HTA, or HTA-related activities are being carried out in the absence of a formal HTA program.

scholarly journals Barriers, needs and potential solutions to reducing vulnerability to global environment change for least developed countries in the Asia-Pacific Region

2017 ◽  
Vol 7 (1) ◽  
Author(s):  
M. Alimullah Miyan ◽  
Natasha Kuruppu ◽  
Opha Pauline Dube ◽  
Mohammed Ataur Rahman ◽  
Tanvir Dewan ◽  
...  
Keyword(s):  
Developed Countries ◽  
Global Environment ◽  
Asia Pacific ◽  
Pacific Region ◽  
Least Developed Countries ◽  
Asia Pacific Region ◽  
Environment Change

scholarly journals Modelos de Precificação de Ativos e o Efeito Liquidez: Evidências Empíricas no Mercado Acionário Brasileiro

2011 ◽  
Vol 9 (3) ◽  
pp. 383 ◽  
Author(s):  
Márcio André Veras Machado ◽  
Otávio Ribeiro de Medeiros
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Liquidity Premium ◽  
Pricing Models ◽  
Portfolio Returns ◽  
Asset Pricing Models ◽  
Three Factor

This paper is aims to analyze whether a liquidity premium exists in the Brazilian stock market. As a second goal, we include liquidity as an extra risk factor in asset pricing models and test whether this factor is priced and whether stock returns were explained not only by systematic risk, as proposed by the CAPM, by Fama and French’s (1993) three-factor model, and by Carhart’s (1997) momentum-factor model, but also by liquidity, as suggested by Amihud and Mendelson (1986). To achieve this, we used stock portfolios and five measures of liquidity. Among the asset pricing models tested, the CAPM was the least capable of explaining returns. We found that the inclusion of size and book-to-market factors in the CAPM, a momentum factor in the three-factor model, and a liquidity factor in the four-factor model improve their explanatory power of portfolio returns. In addition, we found that the five-factor model is marginally superior to the other asset pricing models tested.

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