Download or read book Testing Multi factor Asset Pricing Models in the Visegrad Countries written by Magdalena Morgese Borys and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Multifactor Assets Pricing Model written by Khushboo Sagar and published by . This book was released on 2020 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Generous consideration has been pursued to the empirical testing of multi factor assets pricing models. However, literature provides mixed kind of evidences in the support of multi factor assets pricing model. This study reviews 20 research articles based on multi factor assets pricing model and examines 25 research papers based on the empirically testing of multi factor assets pricing model published during 2001 and 2018 to study the multi factor assets pricing model in the Indian context as well as foreign context. CAPM is a popular normative model used by researchers to explain the relationship between risk and expected return of a risky asset which was developed by Sharpe (1964) and Lintner (1965). This model takes only one risk factor which is the excess market portfolio return (Market premium). Because of poor performance of CAPM in explaining realized returns, the Fama and French three factor asset pricing model (1993) was developed. Fama and French (1993) documented the size effect and the value effect that were not included in the CAPM, generally known as CAPM anomalies. Mark M. Carhart (1997) developed the Carhart four factor model. It is an extension of the FF three factor model with one another factor i.e. momentum factor effect for asset pricing of stocks. In view of the limitations of the earlier three-factor model, Fama and French five-factor asset pricing model (2014) was developed. Fama and French (2014) came with profitability pattern and investment pattern in average stock return along with the market premium, size premium and value premium. This paper may be an expedient source of information to the academics, financial analyst and researchers to understand the asset pricing model.

Download or read book Asset Pricing Factor Models in the German Stock Market written by Julian Fischer and published by GRIN Verlag. This book was released on 2021-06-14 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,7, University of Hannover (Institut für Finanzwirtschaft und Rohstoffmärkte), language: English, abstract: In this paper, we examine how various modern multifactor models, such as the Carhart factor model, five-factor model and its complement six-factor model by Fama and French, the q-factor model by Hou, Wue and Zhang, and the mispricing factor model by Stambaugh and Yuan perform in the German stock market. It is discernible that, depending on the application model, like factor spanning tests, different sortings, return anomalies, sector- and equity fund investigation, they often provide quite similar explanatory power, while in individual cases sometimes one and sometimes the other model performs better. The underlying factors contribute differently to the explanatory power depending on the time period. Thus, in case of doubt, the six-factor model is preferable, as it is the most versatile model. Since the establishment of the capital asset pricing model as a cornerstone of modern capital market theory in the 1960s, new investigations and studies have been built on this model on an ongoing basis. This continuously leads to extensions and modifications of the asset pricing models since then. These models can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. These can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. In this paper, we aim to answer the overarching research question of how modern asset pricing models perform for the German stock market. For this purpose, we first discuss the characteristics of the German stock market, followed by the milestones of the development of factor models, their empirical evidence and their factors, as well as internationally known return anomalies. In the subsequent part, five modern asset pricing models are tested in different scenarios of the German stock market, including factor spanning tests, different sortings, anomalies, sectors and in equity funds. For this purpose, various analytical methods are used and performed with the software “Stata”. Finally, the comprehensive results are summarized and concluded.

Download or read book Exact Factor Pricing in a European Framework written by John Crombez and published by . This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Test of the Multi factor Asset Pricing Model with the ASA NBER Macroeconomic Forecasts written by Kiwoong Cheong and published by . This book was released on 1988 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Multifactor Models Do Not Explain Deviations from the CAPM written by Archie Craig MacKinlay and published by . This book was released on 1994 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: A number of studies have presented evidence rejecting the validity of the Capital Asset Pricing Model (CAPM). This evidence has spawned research into possible explanations. These explanations can be divided into two main categories - the risk based alternatives and the nonrisk based alternatives. The risk based category includes multifactor asset pricing models developed under the assumptions of investor rationality and perfect capital markets. The nonrisk based category includes biases introduced in the empirical methodology, the existence of market frictions, or explanations arising from the presence of irrational investors. The distinction between the two categories is important for asset pricing applications such as estimation of the cost of capital. This paper proposes to distinguish between the two categories using ex ante analysis. A framework is developed showing that ex ante one should expect that CAPM deviations due to missing risk factors will be very difficult to statistically detect. In contrast, deviations resulting from nonrisk based sources will be easy to detect. Examination of empirical results leads to the conclusion that the risk based alternatives is not the whole story for the CAPM deviations. The implication of this conclusion is that the adoption of empirically developed multifactor asset pricing models may be premature.

Download or read book Empirical Analysis of Multifactor Asset Pricing Models A Comparison of US and Japanese REITs written by Tim Perschbacher and published by GRIN Verlag. This book was released on 2023-07-10 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,0, , language: English, abstract: This study is concerned with an empirical analysis of asset pricing. More specifically, this paper examines whether multifactor asset pricing models are able to explain variation in REIT returns in the US and Japan. In addition to traditional multifactor models, an Alternative Four-Factor Model (AFF) was developed considering net profit margin as an additional risk factor. Thence, this paper seeks to provide valuable information for investors and fund managers regarding their indirect real estate investment selection. Using a sample period between July 1994 (US) / July 2011 (Japan) to December 2020, rigorous multiple-time-series regression is applied to calculate factor loadings for each risk factor and the corresponding alpha values of each model to evaluate their effectiveness in explaining variation and cross-section of REIT returns. Most studies on asset pricing models focus on size and value sorted portfolios as dependent variables. This paper broadens the approach with four other double sorted test portfolios to check the robustness of each single factor to explain return anomalies. Results show that market premium and size premium represent risk factors for US-REITs, whereas market premium and value premium are suitable risk factors for Japanese-REITs. The momentum factor does not capture risk and is insignificant in both markets. The study shows low correlations between traditional and REIT specific as well as between US and Japanese risk factors. This suggests that firstly risk factors are country specific and secondly that they are asset specific. Moreover, the Fama-French Three-Factor Model (FF3) clearly outperforms the CAPM, while the Carhart Four-Factor Model (CH4) marginally improves the explanatory power over the FF3. This is observed in both markets. Outcomes demonstrate that the Alternative Four-Factor Model (AAF) does not improve prediction power for returns of Japanese-REITs compared to the FF3 and CH4. On the contrary, results are ambiguous concerning US-REITs. While the additional risk factor, net profit margin, generates a negative return, the model is superior to the FF3 and CH4 in terms of explaining variation and cross-section of returns.

Download or read book Multifactor Consumption Based Asset Pricing Models Using the US Stock Market as a Reference written by John Hunter and published by . This book was released on 2014 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we extend the time series analysis to the panel frame-work to test the C-CAPM driven by wealth references for developed countries. Speciጿically, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error components. The empirical fiijndings of this two-factor model with various speciጿications all indicate that there is signiጿicant unobserved heterogeneity captured by cross-country ጿixed effects when consumption growth is treated as a common factor, of which the average risk aversion coefficient is 4.285. However, the cross-sectional impact of home consumption growth varies dramatically over the countries, where unobserved heterogeneity of risk aversion can also be addressed by random effects.

Download or read book Asset Pricing in Emerging Markets written by Shabir Ahmad Hakim and published by . This book was released on 2015 with total page 678 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging markets are associated with developing economies and are structurally different from the developed markets. They offer higher expected returns as they are experiencing higher growth rates and potential for diversifying the risk in global portfolios as they are partially integrated with the developed markets. However, the structural differences coupled with partial integration limit the capability of the asset pricing models, originally designed for the developed markets, to capture risk and return dynamics of the assets in these markets and necessitate customization of the models to the local settings. Many asset pricing studies undertaken in this direction supplement the factors in developed market models with the factors that are unique to the emerging markets. However, the models have limited scope in explaining asset returns due to limited explanatory power of the factors included. This study proposes a multifactor asset pricing model with nine explanatory factors, which include returns on the local and global market portfolios, exchange rate, and returns on six mimicking portfolios that proxy for the common sources of risks associated with size, book to market value of equity, market liquidity, leverage, quality of earnings, and asset liquidity of firms. The last three factors in the model have not been tested in the emerging markets; among these, asset liquidity is introduced as an explanatory factor in asset pricing in this study. The model is tested in seven emerging markets, namely China, India, Indonesia, Malaysia, Thailand, South Africa, and Brazil using ten-year monthly data on non-financial firms over period of January 2004 to December 2013. Generalized method of moments (GMM) is applied for data analysis and model testing. The findings of the study reveal that the local market portfolio is the most dominant factor in all the markets. It subsumes the effects of the global market portfolio and the exchange rate in most of the markets. In addition, consistent cross-country behaviour of size related factor is observed in explaining returns on small and medium portfolios, and of book to market value of equity related factor in explaining returns on high book to market value portfolios. Other factors in the model exhibit different behaviours in different markets indicating presence of idiosyncrasies in the common sources of risks that drive returns in these markets. The newly introduced asset liquidity factor has strong impact on stock returns in four markets: India, Indonesia, Malaysia and South Africa. Furthermore, the new to emerging markets factors leverage and quality of earnings have noticeable influence on stock returns in two markets each; leverage in India and Malaysia, and quality of earnings in China and Brazil. The observed behaviour of the model in the markets studied mirrors the behaviour expected of asset pricing models in emerging markets, which are partially integrated with one another and are in different stages of economic lifecycle.

Download or read book International Tests of a Five factor Asset Pricing Model written by Eugene F. Fama and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Multifactor Asset Pricing Models and Industry Portfolio Investment Strategies written by Jonathan Shank and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effectiveness of six risk factors when applied to a selection of twenty industry-specific portfolios in explaining those portfolios' returns. The explanatory power of each risk factor, as well as its statistical significance, is judged with respect to the explanatory power provided by the Fama-French Three Factor Model. The three additional factors are the Momentum, and Short and Long-Term price reversal factors. Results indicate that, of the three additional factors, Momentum has the most explanatory power on average. Nevertheless, several exceptions were identified in which the inclusion of the Momentum factor destroys explanatory power, or in which the Short or Long-Term reversal factor yielded significant explanatory power. Results demonstrate the differences of these factors' behavior among the industries tested.

Download or read book The Economics of Banking and Finance in Africa written by Joshua Yindenaba Abor and published by Springer Nature. This book was released on 2022-09-17 with total page 1093 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book evaluates the characteristics and developments in Africa’s financial systems, including monetary policy, structured finance, sustainable finance and banking, FinTech, RegTech, SupTech, inclusive finance, the role of regulation in dealing with banking crises, the impact of the COVID-19 pandemic on Africa’s financial systems and how to reform the post-COVID-19 financial systems. It is made up of contributions from scholars in finance and economics as well as financial market practitioners. Banking and the financial markets play a significant role in the growth of various economies. Although a number of handbooks on banking and finance exist, they mainly focus on Europe, America and Asia. Banks and financial markets in Africa are confronted with different challenges and therefore present a unique case to understand Africa’s financial systems. A number of African countries have experienced banking crises and it is important to examine these issues as well as the regulatory regimes required to address them. This edited book contributes to the limited texts in the area by providing a comprehensive resource on banking and finance for students, scholars, researchers, policymakers, and financial market practitioners. It contains various theoretical and empirical chapters on banking and finance in Africa.

Download or read book Multi Factor Asset Pricing Models for German Stocks written by Wolfgang Bessler and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The large number of asset pricing models and empirical studies of stock returns are evidence of the desire to understand the return generating process of financial assets in general and for stocks in particular. One focus of the research in this area has been on multi-factor asset pricing models [Chen et al. (1986), Fama/French (1992)]. These models are based on the assumption that stock returns are generated by a limited number of economic variables such as company, industry or macroeconomic factors.The objective of this study is to analyze the importance of various economic factors in explaining the return structure for stocks in Germany and to investigate whether the impact of these factors is time varying. This is important, because in most studies of asset pricing models it is assumed that the parameters are non time varying. In particular, we investigate the time variability of the explanatory power and the beta coefficients in a multi-factor framework. For this we employ a rolling estimation procedure that allows us to analyze the time variability of the model coefficients.In the empirical analysis we use monthly data of four macroeconomic variables and the market index to explain the returns of four German industry indices for the period from 1974 to 2000. In contrast to most studies which exclude banks from their empirical analysis we use three industrial indices and a bank index. The economic factors included in our model are term spreads, interest rates, exchange rates and the ifo business index as well as the market index. The empirical results confirm that the factors used in our empirical analysis seem well suited to explain the stock returns especially for banks. Moreover, it is evident that the explanatory power and the beta coefficients are time varying.

Download or read book A Comparison of Multi factor Asset Pricing Models Using US Stock Market Data written by Pia Grammig and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Comparison of the CAPM the Fama French Three Factor Model and Modifications written by Christoph Lohrmann and published by . This book was released on 2015-09-03 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2014 in the subject Economics - Finance, grade: 6,0 (Schweizer Notensystem), University of Liechtenstein, fruher Hochschule Liechtenstein, language: English, abstract: This paper is focused on comparing the Capital Asset Pricing Model, the Fama-French Three Factor model and two modified versions of the Fama-French Model in their ability to explain excess returns. The first modified model contains the same explanatory variables as the Fama-French Model but with an additional AR(1) process. The second modification contains instead of an additional AR(1) an AR(2) process. Evaluated by the adjusted R and the Akaike information criterion, the Fama-French model yields a higher model-fit than the CAPM. The modified Fama-French Model with an AR(2) process leads to significant results for the twice lagged return in the model in four out of six tested portfolios. Therefore, the in-sample regression reveals a higher model-fit of the modified Fama-French model with AR(2) in comparison to the other three models. Since the results differ from a regression in the subsequent period, the results are most likely spurious. Nevertheless, the authors show the high-er model-fit of the Fama-French Three Factor Model in relation to the CAPM."

Download or read book The use of Multi factor Asset Pricing Models in the Corporate Valuation written by Matevž Skočir and published by . This book was released on 2020 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Profitability and Investment Factors for UK Asset Pricing Models written by Eoghan Nichol and published by . This book was released on 2014 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical investigations of the Fama-French three-factor asset pricing model have produced decidedly mixed results, particularly outside of the US market. Two recently proposed alternative multifactor models share a common core of the addition of profitability and investment as factors, but differ in terms of implementation (Fama and French, 2014; Chen, Novy-Marx, and Zhang, 2011). Testing of these models is currently confined to the US market. In this letter we adapt and test these models for the UK and argue that the Fama-French five-factor profitability factor offers the most potential.