scholarly journals Empirical Test of Single Factor and Multi-Factor Asset Pricing Models: Evidence from Non Financial Firms on the Ghana Stock Exchange (GSE)

2015 ◽  
Vol 8 (1) ◽  
pp. 99
Author(s):  
Prince Acheampong ◽  
Sydney Kwesi Swanzy
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Financial Firms ◽  
Portfolio Returns ◽  
Ghana Stock Exchange ◽  
Three Factor

<p>This paper examines the explanatory power of a uni-factor asset pricing model (CAPM) against a multi-factor model (The Fama-French three factor model) in explaining excess portfolio returns on non-financial firms on the Ghana Stock Exchange (GSE). Data covering the period January 2002 to December 2011 were used. A six Size- Book-to-Market (BTM) ratio portfolios were formed and used for the analysis. The paper revealed that, a uni-factor model like the (CAPM) could not predict satisfactorily, the excess portfolio returns on the Ghana Stock Exchange. By using the multi-factor asset pricing model, that is, the Fama-French Three Factor Model, excess portfolio returns were better explained. It is then conclusive enough that, the multi-factor asset pricing model introduced by Fama and French (1992) was a better asset pricing model to explain excess portfolio returns on the Ghana Stock Exchange than the Capital Assets Pricing Model (CAPM) and that there exist the firm size and BTM effects on the Ghanaian Stock market.</p>

An Empirical Test of Capital Asset-pricing Model and Three-factor Model of Fama in Indian Stock Exchange

2018 ◽  
Vol 43 (4) ◽  
pp. 294-307
Author(s):  
Nenavath Sreenu
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
Stock Exchange ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Asset Pricing Model ◽  
Three Factor

This article aims to test the capital asset-pricing model (CAPM) and three-factor model of Fama in Indian Stock Exchange, and it has focused on the recent growth of capital markets in India and the need of practitioners in these markets to determine a stable price for securities, and achieving expected returns has brought into consideration the theories predicting price securities Among different models the CAPM of Sharp. The study uses a sample of daily data and annual average for 54 companies listed on the National Stock Exchange, during the period from 2010 to 2016. The research article’s intention is to find whether the relationship between expected return and risk is linear, if beta is a complete measure of the risk and if a higher risk is compensated by a higher expected return. The results confirm that the intercept is statistically insignificant, upholding theory, for both individual assets and portfolios. The tests do not essentially provide validation against CAPM and Fama; however, other simulations can be built, more close to reality, by improving the model and offering an alternative which also takes into account the specific conditions of the Indian capital market and the global financial crisis consequences.

scholarly journals Application of the q-factor Model to the Japanese Share Market

2017 ◽  
Vol 9 (6) ◽  
pp. 15
Author(s):  
Brooke Alexandra Maeda
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
Stock Exchange ◽  
Value Premium ◽  
Q Factor ◽  
Pricing Model ◽  
Monthly Data ◽  
Asset Pricing Model ◽  
Tokyo Stock Exchange ◽  
Three Factor

This paper tests the performance of the q-factor model proposed by Hou et al. (2015) to the Japanese share market. It examines ten years of monthly data for shares listed on both the First section and Second section of the Tokyo Stock Exchange. The results suggest that the q-factor model does not adequately explain returns for shares listed on the Tokyo Stock Exchange. For comparison purposes the data sample is applied to the Fama French three-factor model. The results of this analysis suggest that the Fama French three-factor model is more appropriate for the Japanese share market, and it provides evidence of a strong value premium. The factor which correlates to the value factor in the q-factor model was not significant, providing stronger support against the q-factor model as an adequate asset pricing model for Japan. 

scholarly journals The contribution of corporate social responsibility to financial performance: a factor model of Canadian stocks

2021 ◽  
Author(s):  
Mohammad Behroyan
Keyword(s):  
Corporate Social Responsibility ◽  
Asset Pricing ◽  
Social Responsibility ◽  
Factor Model ◽  
Explanatory Power ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Factor I ◽  
Fama And French ◽  
Corporate Social

This paper studies the effect of corporate social responsibility (CSR) on the returns of Canadian stocks. It employs the 3-factor asset-pricing model created by Fama and French (1993) and adds a new CSR factor (2x3 sorts) to examine if the explanatory power of the model is improved by the CSR factor. I, also, introduce an alternative method to create a 4-factor model (2x2x2 sorts). The results of my tests show the CSR factor does not improve the explanatory power of the Fama French models. Furthermore, replacing HML by CSR captures no more excess returns and I conclude that corporate social responsibility is not a priced factor in Canadian capital markets. In addition, the 3-factor model (based on Rm-Rf, SMB, HML) generates the exactly same results as Fama-French (1993 and 2015) models. Finally, I find that large firms, especially big size-low BE/ME companies, tend to be more “ethical”.

scholarly journals DOES CAPITAL ASSET PRICING MODEL APPLY IN A VARYING MARKET CONDITIONS?

2019 ◽  
Vol 4 (1) ◽  
pp. 57
Author(s):  
Michael Amoh Asiedu ◽  
Richard Oduro ◽  
Emmanuel Kojo Amoah
Keyword(s):  
Asset Pricing ◽  
Stock Exchange ◽  
Emerging Market ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Market Conditions ◽  
Asset Pricing Model ◽  
Ghana Stock Exchange

Purpose: Capital asset pricing model (CAPM) has been one of the major asset pricing tools applied on the capital market to price listed securities. Several researchers have challenged the overall efficiency and validity of the model in terms of its ability to explain the behavior of the average returns on the basis of a single variable. The debate is now taking a new trend which aimed at assessing the robustness of the model in varying market conditions and this has been the main focus of the study; that is to determine whether or not CAPM applies to securities on Ghana Stock Exchange at different market conditions.Methodology: Data on monthly returns of 29 shares were selected from the Ghana Stock Exchange spanning from 2010 to 2018 and analyzed using regression analysis on the assumption of constant risk and varying risk situations.Findings: The study evidenced that the systematic risks differ between bulls, tranquil and bear periods. Market conditions therefore have impact on the CAPM model. CAPM is not robust with changes in market conditions after all especially in an emerging market such as the Ghana Stock Exchange.Contribution to theory, practice and policy: The result of this study implies that, the widely accepted CAPM for asset pricing model is not robust to changes in market conditions. It is therefore essential to predict future market conditions when formulating investment strategy as an investor. Again, investors should vary their risk premium depending on their expectation of the market conditions at the time of investment.

scholarly journals Analisis Komparasi Capital Asset Pricing Model dan Fama-French Three Factor Model untuk Penentuan Investasi Pada Saham Indeks IDX30 (Periode 2016 – 2018)

2020 ◽  
Vol 2 (2) ◽  
pp. 1
Author(s):  
Nadyah Brhigitta Dwiyuningsih Dotulong ◽  
Lanto Miriatin Amali ◽  
Selvi Selvi
Keyword(s):  
Asset Pricing ◽  
Annual Report ◽  
Factor Model ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Three Factor

Penelitian ini bertujuan untuk mengetahui Metode Capital Asset Pricing Model dan Fama-French Three Factor Model untuk penentuan investasi pada saham Indeks IDX30 periode 2016 – 2018 serta untuk membandingkan antara dua model tersebut model manakah yang memiliki tingkat akurasi yang lebih tinggi untuk mempertimbangkan tingkat return dan risikonya. Metode yang digunakan dalam penelitian ini adalah deskriptif komparatif dengan pendekatan kuantitatif. Adapun data yang digunakan adalah data berupa laporan keuangan tahunan (annual report) Indeks IDX30 periode 2016 – 2018. Hasil penelitian ini menunjukkan bahwa Metode Capital Asset Pricing Model merupakan model yang lebih akurat dibandingkan Fama-French Three Factor Model. Selain terlihat sederhana, model Capital Asset Pricing Model ini juga lebih akurat dalam menentukan investasi sesuai dengan tingkat pengembalian yang diharapkan dan risiko yang bersedia ditanggung dan model ini dapat memberikan informasi secepat-cepatnya mengenai tingkat pengembalian dan risiko yang akan ditanggung investor. Kata-kata Kunci:Metode Capital Asset Pricing Model, Fama-French Three Factor Model, dan Indeks IDX30. 

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.

scholarly journals The contribution of corporate social responsibility to financial performance: a factor model of Canadian stocks

2021 ◽  
Author(s):  
Mohammad Behroyan
Keyword(s):  
Corporate Social Responsibility ◽  
Asset Pricing ◽  
Social Responsibility ◽  
Factor Model ◽  
Explanatory Power ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Factor I ◽  
Fama And French ◽  
Corporate Social

This paper studies the effect of corporate social responsibility (CSR) on the returns of Canadian stocks. It employs the 3-factor asset-pricing model created by Fama and French (1993) and adds a new CSR factor (2x3 sorts) to examine if the explanatory power of the model is improved by the CSR factor. I, also, introduce an alternative method to create a 4-factor model (2x2x2 sorts). The results of my tests show the CSR factor does not improve the explanatory power of the Fama French models. Furthermore, replacing HML by CSR captures no more excess returns and I conclude that corporate social responsibility is not a priced factor in Canadian capital markets. In addition, the 3-factor model (based on Rm-Rf, SMB, HML) generates the exactly same results as Fama-French (1993 and 2015) models. Finally, I find that large firms, especially big size-low BE/ME companies, tend to be more “ethical”.

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