scholarly journals New JLS-Factor Model versus the Standard JLS Model: A Case Study on Chinese Stock Bubbles

2017 ◽  
Vol 2017 ◽  
pp. 1-15 ◽  
Author(s):  
Zongyi Hu ◽  
Chao Li
Keyword(s):  
Factor Model ◽  
Statistical Tests ◽  
Explanatory Power ◽  
Critical Time ◽  
Flexible Tool ◽  
Regime Changes ◽  
Chinese Characteristics ◽  
Model Versus ◽  
The Interest Rate ◽  
Equity Indices

In this paper, we extend the Johansen-Ledoit-Sornette (JLS) model by introducing fundamental economic factors in China (including the interest rate and deposit reserve rate) and the historical volatilities of targeted and US equity indices into the original model, which is a flexible tool to detect bubbles and predict regime changes in financial markets. We then derive a general method to incorporate these selected factors in addition to the log-periodic power law signature of herding and compare the prediction accuracy of the critical time between the original and the new JLS models (termed the JLS-factor model) by applying these two models to fit two well-known Chinese stock indices in three bubble periods. The results show that the JLS-factor model with Chinese characteristics successfully depicts the evolutions of bubbles and “antibubbles” and constructs efficient end-of-bubble signals for all bubbles in Chinese stock markets. In addition, the results of standard statistical tests demonstrate the excellent explanatory power of these additive factors and confirm that the new JLS model provides useful improvements over the standard JLS model.

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 Confronting Theories of Firm Growth in Light of Degrees-of-Freedom Analysis

2015 ◽  
Vol 22 (74) ◽  
pp. 385-404
Author(s):  
Sérgio Fernando Loureiro Rezende ◽  
Ricardo Salera ◽  
José Márcio de Castro
Keyword(s):  
Degrees Of Freedom ◽  
Firm Growth ◽  
Dynamic Capabilities ◽  
Statistical Tests ◽  
Explanatory Power ◽  
Stage Theory ◽  
Chi Square ◽  
Growth Optimum ◽  
Chi Square Test ◽  
Do So

This article aims to confront four theories of firm growth – Optimum Firm Size, Stage Theory of Growth, The Theory of the Growth of the Firm and Dynamic Capabilities – with empirical data derived from a backward-looking longitudinal qualitative case of the growth trajectory of a Brazilian capital goods firm. To do so, we employed Degree of Freedom-Analysis for data analysis. This technique aims to test the empirical strengths of competing theories using statistical tests, in particular Chi-square test. Our results suggest that none of the four theories fully explained the growth of the firm we chose as empirical case. Nevertheless, Dynamic Capabilities was regarded as providing a more satisfactory explanatory power.

scholarly journals HEDGE FUNDS: RISK AND PERFORMANCE

2018 ◽  
Vol 06 (01) ◽  
pp. 1850003
Author(s):  
SANGHEON SHIN ◽  
JAN SMOLARSKI ◽  
GÖKÇE SOYDEMIR
Keyword(s):  
Risk Factors ◽  
Hedge Funds ◽  
Factor Model ◽  
Explanatory Power ◽  
Hedge Fund ◽  
Investment Strategy ◽  
Time Varying ◽  
Asset Class ◽  
And Performance ◽  
Fund Portfolio

This paper models hedge fund exposure to risk factors and examines time-varying performance of hedge funds. From existing models such as asset-based style (ABS)-factor model, standard asset class (SAC)-factor model, and four-factor model, we extract the best six factors for each hedge fund portfolio by investment strategy. Then, we find combinations of risk factors that explain most of the variance in performance of each hedge fund portfolio based on investment strategy. The results show instability of coefficients in the performance attribution regression. Incorporating a time-varying factor exposure feature would be the best way to measure hedge fund performance. Furthermore, the optimal models with fewer factors exhibit greater explanatory power than existing models. Using rolling regressions, our customized investment strategy model shows how hedge funds are sensitive to risk factors according to market conditions.

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.

scholarly journals The Fama-French Five-Factor Model Plus Momentum: Evidence for the German Market

2020 ◽  
Vol 72 (4) ◽  
pp. 661-684 ◽  
Author(s):  
Philipp Dirkx ◽  
Franziska J. Peter
Keyword(s):  
Asset Pricing ◽  
Preliminary Analysis ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Market Size ◽  
German Market ◽  
Monthly Data ◽  
Factors Associated ◽  
Country Specific

Abstract We implement the Fama-French five-factor model and enhance it with a momentum factor for the German market using recent monthly data from 2002 to 2019. We construct the factors associated with the market, size, value, profitability, investment, and momentum for the CDAX constituents and examine to what extent this six-factor model captures the return premia in the German market. Our preliminary analysis does not document any significant evidence on the profitability or investment premium. The results on the six-factor model compared with the three-factor model reveal that the additional factors do not add significant explanatory power to the analysis. We conclude that the relevance of the profitability and investment factors within the context of international asset pricing studies cannot be transferred to the country- specific case of the German market.

scholarly journals Hubble flow variations as a test for inhomogeneous cosmology

2019 ◽  
Vol 622 ◽  
pp. A83 ◽  
Author(s):  
Christoph Saulder ◽  
Steffen Mieske ◽  
Eelco van Kampen ◽  
Werner W. Zeilinger
Keyword(s):  
Large Scale ◽  
Cold Dark Matter ◽  
Statistical Tests ◽  
Specific Model ◽  
Accelerated Expansion ◽  
Inhomogeneous Cosmology ◽  
Galaxy Surveys ◽  
Model Versus ◽  
Differential Expansion ◽  
Hubble Flow

Context. Backreactions from large-scale inhomogeneities may provide an elegant explanation for the observed accelerated expansion of the universe without the need to introduce dark energy. Aims. We propose a cosmological test for a specific model of inhomogeneous cosmology, called timescape cosmology. Using large-scale galaxy surveys such as SDSS and 2MRS, we test the variation of expansion expected in the Λ-cold dark matter (Λ-CDM) model versus a more generic differential expansion using our own calibrations of bounds suggested by timescape cosmology. Methods. Our test measures the systematic variations of the Hubble flow towards distant galaxies groups as a function of the matter distribution in the lines of sight to those galaxy groups. We compare the observed systematic variation of the Hubble flow to mock catalogues from the Millennium Simulation in the case of the Λ-CDM model, and a deformed version of the same simulation that exhibits more pronounced differential expansion. Results. We perform a series of statistical tests, ranging from linear regressions to Kolmogorov-Smirnov tests, on the obtained data. They consistently yield results preferring Λ-CDM cosmology over our approximated model of timescape cosmology. Conclusions. Our analysis of observational data shows no evidence that the variation of expansion differs from that of the standard Λ-CDM model.

scholarly journals Analysis of the Spanish IBEX-35 Companies’ Returns Using Extensions of the Fama and French Factor Models

Symmetry ◽  
2020 ◽  
Vol 12 (2) ◽  
pp. 295 ◽  
Author(s):  
Francisco Jareño ◽  
María de la O González ◽  
Laura Munera
Keyword(s):  
Interest Rates ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Factor Models ◽  
Final Conclusion ◽  
Economic Cycle ◽  
Explanatory Factors ◽  
Nominal Interest Rates ◽  
Fama And French

This paper studies in depth the sensitivity of Spanish companies’ returns to changes in several risk factors between January 2000 and December 2018 using the quantile regression approach. Concretely, this research applies extensions of the Fama and French three- and five-factor models (1993 and 2015), according to González and Jareño (2019), adding relevant explanatory factors, such as nominal interest rates, the Carhart (1997) risk factor for momentum and for momentum reversal and the Pastor and Stambaugh (2003) traded liquidity factor. Additionally, for robustness, this paper splits the entire sample period into three sub-sample periods (pre-crisis, crisis and post-crisis) to analyse the results according to the economic cycle. The main conclusions of this paper are fourfold: First, these two models have the greatest explanatory power in the extreme quantiles of the return distribution (0.1 and 0.9) and more specifically in the lowest quantile 0.1. Second, the second model, based on the Fama and French five-factor model, shows the highest explanatory power not only in the full period but also in the three sub-periods. Third, the bank BBVA is the company that shows the highest sensitivity to changes in the explanatory factors in most periods because its adjusted R2 is the highest. Fourth, the stage of the economy with the highest explanatory power is the crisis subperiod. Thus, the final conclusion of this paper is that the second model explains best variations in Spanish companies’ returns in crisis stages and low quantiles.

scholarly journals Interest rate sensitivity of spanish companies. An extension of the Fama-French five-factor model

2018 ◽  
Vol 68 (4) ◽  
pp. 617-638 ◽  
Author(s):  
Francisco Jareño ◽  
María de la O González ◽  
Marta Tolentino ◽  
Sara Rodríguez
Keyword(s):  
Interest Rates ◽  
Stock Returns ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Rate Sensitivity ◽  
Share Prices ◽  
Explanatory Variables ◽  
Fama And French ◽  
Recent Financial Crisis

This paper studies the sensitivity of share prices of Spanish companies included in the IBEX-35 to changes in different explanatory variables, such as market returns, interest rates and factors proposed by Fama and French (1993, 2015) between 2000 and 2016. In addition, for robustness, this paper analyses whether the sensitivity of stock returns is different between two periods: precrisis and recent financial crisis. The results confirm that, in general, all the considered factors are relevant. Furthermore, “market return” and “size” factors show greater explanatory power, together with the “value” factor in the crisis period. Regarding the analysis at sector level, “Oil and Energy”, “Basic Materials, Industry and Construction” and “Financial and Real Estate Services” sectors appear to be highly sensitive to changes in the risk factors included in the asset pricing factor model.

Evaluating Structural Equation Models with Unobservable Variables and Measurement Error

1981 ◽  
Vol 18 (1) ◽  
pp. 39-50 ◽  
Author(s):  
Claes Fornell ◽  
David F. Larcker
Keyword(s):  
Measurement Error ◽  
Sample Size ◽  
Structural Equation ◽  
Structural Model ◽  
Structural Equation Models ◽  
Statistical Tests ◽  
Explanatory Power ◽  
Measurement Model ◽  
Measurement Properties ◽  
Chi Square

The statistical tests used in the analysis of structural equation models with unobservable variables and measurement error are examined. A drawback of the commonly applied chi square test, in addition to the known problems related to sample size and power, is that it may indicate an increasing correspondence between the hypothesized model and the observed data as both the measurement properties and the relationship between constructs decline. Further, and contrary to common assertion, the risk of making a Type II error can be substantial even when the sample size is large. Moreover, the present testing methods are unable to assess a model's explanatory power. To overcome these problems, the authors develop and apply a testing system based on measures of shared variance within the structural model, measurement model, and overall model.

Tracing the Big Five in parents' free descriptions of their children

1995 ◽  
Vol 9 (4) ◽  
pp. 283-304 ◽  
Author(s):  
Geldolph A. Kohnstamm ◽  
Ivan Mervielde ◽  
Elias Besevegis ◽  
Charles F. Halverson
Keyword(s):  
Rating Scales ◽  
Factor Model ◽  
Five Factor Model ◽  
Explanatory Power ◽  
Second Phase ◽  
Personality Psychology ◽  
Coding Scheme ◽  
Adult Personality ◽  
Interesting Culture ◽  
The Usa

Because of the impressive replicability of the Five‐Factor Model (FFM) in adult personality psychology, developmental psychologists have recently begun a search for the antecedents of these five adult dimensions in childhood. The FFM originates in rating scales applied to ‘personality words’, notably adjectives, selected from dictionaries. To test the explanatory power of the FFM as a model for individual differences in childhood, we used a different source for the lexicon of personality. Parents of children aged 3, 6, 9, and 12 years were asked simply ‘to describe your child’. The audiotaped interviews were transcribed literally and then coded using an elaborate coding scheme. We here describe data from three of the countries involved in this cross‐cultural project (Holland, Belgium, and Greece). The data are the results of coding free descriptions for a total of 186 3‐year‐olds and 229 9‐year‐olds. These data represent the first phase of a four‐phase project that includes researchers from The Netherlands, Belgium, Greece, Poland, Germany, the USA, and China. Results from this first phase were very similar over the participating countries although there were some interesting culture‐specific differences. In the second phase, questionnaire items based on the free descriptors in each category of the coding scheme will be written by the research teams. Such items will be rated by new samples of parents. Factor analyses will reduce the item pool to about one hundred items. These will then be given to new samples of parents of children of the ages indicated above. In the last phase, the factor structures will be compared across cultures and be analysed for their resemblance to the FFM, as well as other models of the structure of temperament and personality in childhood.

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