The impact of corporate lifecycle on Fama–French three-factor model

2019 ◽  
Vol 513 ◽  
pp. 390-398 ◽  
Author(s):  
Hao Liu ◽  
Ya-Chun Gao
Keyword(s):  
Factor Model ◽  
The Impact ◽  
Three Factor

scholarly journals Analysis of the Fama-French Model (FF5) Factor on the Food Industry under the COVID-19 Epidemic

2021 ◽  
Vol 13 ◽  
pp. 270-275
Author(s):  
Shiyun Yang ◽  
Zijia Cheng ◽  
Zihan Xia
Keyword(s):  
Market Segmentation ◽  
Global Economy ◽  
Food Industry ◽  
Factor Model ◽  
Five Factor Model ◽  
Current Status ◽  
Before And After ◽  
The Impact ◽  
Development Prospects ◽  
Three Factor

Due to the impact of the COVID-19 epidemic, the global economy has been affected to some extent in all aspects, with the food industry bearing the brunt. However, the specific research on the stock market segmentation industry is relatively lacking. This article aims to analyze the food industry's current status and development prospects by discussing the Fama-French three-factor model and five-factor model before and after the epidemic in the food industry and put forward constructive opinions on this. The analysis will use the method of coefficient comparison and effectiveness comparison to analyze the food industry's coefficients before and after the epidemic in the same model and model differences and combine the background of the industry to get the reasons for these differences.

scholarly journals Identifying outliers in asset pricing data with a new weighted forward search estimator

2020 ◽  
Vol 31 (84) ◽  
pp. 458-472
Author(s):  
Alexandre Aronne ◽  
Luigi Grossi ◽  
Aureliano Angel Bressan
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
The United States ◽  
Estimation Methods ◽  
Annual Data ◽  
Forward Search ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
The Impact ◽  
Three Factor

ABSTRACT The purpose of this work is to present the Weighted Forward Search (FSW) method for the detection of outliers in asset pricing data. This new estimator, which is based on an algorithm that downweights the most anomalous observations of the dataset, is tested using both simulated and empirical asset pricing data. The impact of outliers on the estimation of asset pricing models is assessed under different scenarios, and the results are evaluated with associated statistical tests based on this new approach. Our proposal generates an alternative procedure for robust estimation of portfolio betas, allowing for the comparison between concurrent asset pricing models. The algorithm, which is both efficient and robust to outliers, is used to provide robust estimates of the models’ parameters in a comparison with traditional econometric estimation methods usually used in the literature. In particular, the precision of the alphas is highly increased when the Forward Search (FS) method is used. We use Monte Carlo simulations, and also the well-known dataset of equity factor returns provided by Prof. Kenneth French, consisting of the 25 Fama-French portfolios on the United States of America equity market using single and three-factor models, on monthly and annual basis. Our results indicate that the marginal rejection of the Fama-French three-factor model is influenced by the presence of outliers in the portfolios, when using monthly returns. In annual data, the use of robust methods increases the rejection level of null alphas in the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor model, with more efficient estimates in the absence of outliers and consistent alphas when outliers are present.

scholarly journals The Impact of Herding on the Risk Pricing in the Egyptian Stock Exchange

2020 ◽  
Vol 11 (2) ◽  
pp. 19-37
Author(s):  
Mustafa Hussein Abd-Alla ◽  
Mahmoud Sobh
Keyword(s):  
Factor Model ◽  
Stock Exchange ◽  
Additional Risk Factor ◽  
Additional Risk ◽  
Behaviour Factor ◽  
Risk Pricing ◽  
Fama And French ◽  
The Impact ◽  
Egyptian Stock Exchange ◽  
Three Factor

We test the impact of herding behaviour on the risk pricing in the Egyptian Stock Exchange (EGX) by adding an additional risk factor reflecting herding behaviour to the Fama and French three-factor model. We construct a portfolio to mimic an additional risk factor related to herding behaviour, in addition to the original risk factors in the Fama and French three-factor model. The three-factor model will be tested in its original form and re-tested after adding the herding behaviour factor. The study is based on Hwang and Salmon methodology, in which the state space approach based on Kaman’s filter was used to measure herding behaviour. We used monthly excess stock returns of 50 stocks listed on the EGX from January 2014 to December 2018. The results do not support Fama and French model before and after adding the herding behaviour factor, therefore, there is no effect of herding behaviour on the risk pricing in the Egyptian Stock Exchange.

scholarly journals Multilayer Network Risk Factor Pricing Model

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-6
Author(s):  
Yu Liu ◽  
Conglin Hu ◽  
Lei Wang ◽  
Kun Yang
Keyword(s):  
Risk Factor ◽  
Stock Returns ◽  
Factor Model ◽  
Positive Impact ◽  
Pricing Model ◽  
Multilayer Network ◽  
Excess Stock Returns ◽  
Network Risk ◽  
The Impact ◽  
Three Factor

This paper proposes a multilayer network risk factor pricing model to depict the impact of interactions between stocks on excess stock returns by constructing the network risk factor based on the stock multilayer network and introducing it to the traditional three-factor pricing model. According to China’s stock market data, we find that compared with the traditional three-factor model, the multilayer network risk factor pricing model can achieve higher fitting degree. Meanwhile, the multilayer network risk factor has a significant positive impact on the excess stock returns in most cases.

The role of efficiency in capital asset pricing: a research on Nasdaq technology sector

2020 ◽  
Vol 46 (11) ◽  
pp. 1479-1493
Author(s):  
Hakan Aygoren ◽  
Emrah Balkan
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Factor Model ◽  
Explanatory Power ◽  
Efficiency Factor ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Content Type ◽  
The Impact ◽  
Three Factor

PurposeThe aim of this study is to investigate the role of efficiency in capital asset pricing. The paper explores the impact of a four-factor model that involves an efficiency factor on the returns of Nasdaq technology firms.Design/methodology/approachThe paper relies on data of 147 firms from July 2007 to June 2017 to examine the impact of efficiency on stock returns. The performances of the capital asset pricing model (CAPM), Fama–French three-factor model and the proposed four-factor model are evaluated based on the time series regression method. The parameters such as the GRS F-statistic and adjusted R² are used to compare the relative performances of all models.FindingsThe results show that all factors of the models are found to be valid in asset pricing. Also, the paper provides evidence that the explanatory power of the proposed four-factor model outperforms the explanatory power of the CAPM and Fama–French three-factor model.Originality/valueUnlike most asset pricing studies, this paper presents a new asset pricing model by adding the efficiency factor to the Fama–French three-factor model. It is documented that the efficiency factor increases the predictive ability of stock returns. Evidence implies that investors consider efficiency as one of the main factors in pricing their assets.

Performance of Socially Responsible Portfolios Do Economic Conditions Matter?

2015 ◽  
Vol 4 (1) ◽  
Author(s):  
Varun Bhandari ◽  
Vanita Tripathi
Keyword(s):  
Factor Model ◽  
Socially Responsible Investing ◽  
Sharpe Ratio ◽  
Economic Conditions ◽  
Socially Responsible ◽  
Cross Sectional ◽  
Responsible Investing ◽  
Market Portfolio ◽  
The Impact ◽  
Three Factor

In a first of its kind, this paper examines the performance of various socially responsible stocks portfolios as compared to general stocks portfolios and market portfolio using return and various risk-adjusted measures over the period January 1996 - December 2013 and over different business economic conditions. Besides the conventional risk-adjusted measures, we have also used modified Sharpe ratio, double Sharpe ratio, M2 measure, alpha based on three factor Fama-French model and Famas decomposition measure. Further we have checked for the impact of economic conditions (recession or boom) on the alpha and slope coefficients. We have also examined whether single factor CAPM is sufficient to explain cross sectional variations across portfolios or we need a multi-factor model (like Fama-French three factor model). We find that despite having higher risk, socially responsible stocks portfolios generated significantly higher returns and hence outperformed other portfolios on the basis of all risk-adjusted measures as well as net selectivity returns during both recession and boom periods. The results uphold even with the use of Fama-French three factor model for estimating excess returns. The empirical results, besides augmenting the existing literature on performance evaluation, clearly indicate that investors in India have become more socially conscious as the stock market is rewarding socially responsible companies well in terms of higher returns (on risk adjusted basis). The study supports the view that socially responsible investing is boon for investors in India. Therefore, regulators, policy makers and mutual funds should construct and make available various socially responsible investment products to initiate the movement of socially responsible investing in India.

Risk and returns in Shari’ah-compliant cross-section stocks: evidence from an emerging market

2019 ◽  
Vol 10 (5) ◽  
pp. 621-643
Author(s):  
Muhammad Hanif ◽  
Abdullah Iqbal ◽  
Zulfiqar Shah
Keyword(s):  
Risk Factors ◽  
Stock Returns ◽  
Factor Model ◽  
Stock Exchange ◽  
Emerging Market ◽  
Explanatory Power ◽  
Market Returns ◽  
Content Type ◽  
The Impact ◽  
Three Factor

Purpose This study aims to understand and document the impact of market-based – market returns and momentum – as well as firm-specific – size, book-to-market (B/M) ratio, price-to-earnings ratio (PER) and cash flow (CF) – factors on pricing of Shari’ah-compliant securities as explanation of variations in stock returns in an emerging market – Pakistan’s Karachi Stock Exchange. Design/methodology/approach Initially, the authors test Fama and French (FF) three-factor model – market risk premium, size and B/M – followed by modified FF model by including additional risk factors (PER, CF and momentum) over a 10-year period (2001-2010). Findings Our results support superiority of FF three-factor model over single-factor capital asset pricing model. However, addition of further risk factors – including PER, CF and momentum – improves explanatory power of the model, as well as refines the selection of risk factors. In this study, CF, B/M and momentum factors remain insignificant. Traditional B/M factor in FF model is replaced by PER. Practical implications Based on the modified FF model, the authors propose a stock valuation model for Shari’ah-compliant securities consisting of three factors: market returns, size and earnings, which explains 76per cent variations in cross sectional stock returns. Originality/value To the best of the authors’ knowledge, this is the first study (which combines market-based as well as fundamental factors) on pricing of Islamic securities and identification of risk factors in an emerging market – Karachi Stock Exchange.

scholarly journals The Impact of the Financial Sector on Asset Pricing Tests: Evidence from the Colombo Stock Exchange

2016 ◽  
Vol 8 (2) ◽  
pp. 113
Author(s):  
Amal Peter Abeysekera ◽  
Nimal Pulukkuttige Don
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Factor Model ◽  
Stock Exchange ◽  
Financial Sector ◽  
Size Premium ◽  
Fama And French ◽  
The Impact ◽  
Three Factor ◽  
Better Than

<p>This paper aims to identify how the inclusion of financial sector affects the ability of asset pricing models to explain the average stock returns in the CSE.  Most of the asset pricing researches, the firms in the financial sector are excluded on the basis that their characteristics and the leverage are notably different than firms in other industries. Therefore the objective of this study is to identify the impact of the inclusion of financial sector on the ability of the Carhart four-factor model to explain the average stock returns in the CSE and to compare its performance with the Capital Asset Pricing Model (CAPM) and the Fama and French three-factor model. The study finds that the four-factor model; incorporating the market premium, size premium, value premium and momentum premium provides a satisfactory explanation of the variation in the cross-section of average stock returns in the CSE, even when the financial sector is included. It is found that the Carhart four-factor model performs better than the CAPM in all scenarios; and that it performs notably better than the Fama and French three-factor model.However, there is no notable difference in the findings either the financial sector is included or not. </p>

scholarly journals Оценка влияния срока производства прививок, длительности аэрации и стимуляторов роста на выход и качество привитых черенков винограда

2019 ◽  
Author(s):  
V.P. Klimenko ◽  
M.N. Borisenko ◽  
Y.A. Belinskiy ◽  
O.A. Pelekh ◽  
A.V. Raikov
Keyword(s):  
Data Analysis ◽  
Factor Model ◽  
Time Factor ◽  
Variance Analysis ◽  
Cabernet Sauvignon ◽  
The Impact ◽  
Three Factor

Проведен эксперимент по исследованию приемов стратификации виноградных прививок на воде по разработанному плану полного трехфакторного эксперимента, всего 60 вариантов в трехкратной повторности. Выполнена прививка сорта Каберне-Совиньон на подвое Кобер 5ББ в условиях прививочной мастерской, всего 3960 шт. привитых черенков. Для анализа данных использовали трехфакторный дисперсионный анализ. Исследование позволяет признать с вероятностью не ниже 0,95, что влияние срока прививки и аэрации в целом на качество привитых черенков является достоверным. Варианты срока производства прививок, как и варианты аэрации, существенно отличались друг от друга по силе действия. Недостоверным оказалось влияние стимуляторов и взаимодействия стимуляторов и аэрации на качество привитых черенков. Общая корреляция многофакторной модели для привитых черенков с зачаточными побегами достоверна и составляет 0,878, R2 0,771. Исследование позволяет признать с вероятностью не ниже 0,95, что влияние срока прививки на выход привитых черенков с зачаточными побегами является достоверным. Результаты показывают отчетливое влияние фактора срока прививки на количество черенков с зачаточными побегами, которое детерминирует не менее 1/2 изменчивости этого показателя. Общая корреляция многофакторной модели для привитых черенков с зачаточными корнями достоверна и составляет 0,922, R2 0,851. Исследование позволяет признать с вероятностью не ниже 0,95, что влияние срока прививки и аэрации на выход привитых черенков с зачаточными корнями является достоверным. Результаты показывают значительное влияние факторов срока прививки и аэрации на количество черенков с зачаточными корнями, которые в совокупности детерминируют почти 3/4 изменчивости этого показателя. Таким образом, влияние срока производства прививок и длительности аэрации на качество привитых черенков является достоверным.An experiment was conducted to test grapevine graftings stratification techniques performed in water, according to the designed plan of a full-fledged three-factor trial that involved 60 variants of three replications each. Cabernet Sauvignon was grafted on Kober 5 BB rootstock in the conditions of a grafting shop with a total of 3960 grafted grape cuttings. A three-factor variance analysis was used for data analysis. The study carried a nearly 0.95 inference that the time of the grafting and overall aeration indeed had an impact on the quality of grafted cuttings. The grafting timing as well as aeration variants differed significantly from each other in their impact. The influence of stimulators and synergy of stimulators and aeration in their impact on the quality of grafted cuttings proved untrue. The overall correlation of the multi-factor model for grafted cuttings with primordial shoots was confirmed, and constituted 0.878, R2 0.771. The study allowed us to conclude with a 0.95 probability that the grafting period had impact on the output of grafted cuttings with rudimentary shoots. The results demonstrate a distinct correlation between the grafting time factor and the number of cuttings with primordial shoots, which determines at least of the variability of this value. Overall correlation of the multi-factor model for grafted cuttings with primordial roots proved true, and constituted 0.922, R2 0.851. The study proved with a 0.95 probability that grafting time and aeration influenced the output of grafted cuttings with primordial roots. The results demonstrate a significant correlation between the grafting timing and aeration factors, and the number of cuttings with primordial roots, which collectively determine almost of the variability of this value. Thus, the impact of the grafting time and duration of aeration on the quality of grafted cuttings was confirmed.

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