Evidence To Support Multifactor Asset Pricing Models
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Evidence To Support Multifactor Asset Pricing Models
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Author : Supriya Maheshwari
language : en
Publisher:
Release Date : 2016
Evidence To Support Multifactor Asset Pricing Models written by Supriya Maheshwari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Emerging stock market returns have been extensively studied by academic community over the past two decades. However, there is still no consensus among the researchers and practitioners as to which asset pricing models should be used to explain returns in these markets. The basic objective of the study is to evaluate the power and performance of multi-factor asset pricing models (three and four factor model) over the traditional one factor CAPM, using the data from one of the fastest growing emerging market: India. The study using a large sample data of 470 listed stocks over a period of 16 years stretching from January 1997 to March 2013, evaluate the relevance of Fama and French three factor model as well as liquidity augmented four factor model in explaining the stock return variations in the Indian stock market. The study employs time series regression approach to examine the impact of market risk, size risk, value risk and liquidity risk on stock returns. The overall results of the study provide support to the multi-dimensional nature of risk and suggest the use of multi-factor asset pricing models for consideration in investment decisions. Both Fama and French three factor model and liquidity augmented four factor model were found to be superior than traditional one factor CAPM. Though, liquidity augmented four factor model was found to be slightly better in explaining Indian stock returns as compared to Fama and French three factor model.
Multifactor Assets Pricing Model
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Author : Khushboo Sagar
language : en
Publisher:
Release Date : 2020
Multifactor Assets Pricing Model written by Khushboo Sagar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
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.
Multifactor Asset Pricing Model
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Author : Kok Foo Theang
language : en
Publisher:
Release Date : 2019
Multifactor Asset Pricing Model written by Kok Foo Theang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Numerous studies have shown that stock returns can be predicted over time with the multifactor asset pricing model based on the Arbitrage Pricing Theory (APT). However, the application of the multifactor asset pricing model in emerging markets remains debatable, owing to differences in the economic, cultural, and political structure. Using both the time-series regression approach and machine learning approach, this study finds that Fama-French profitability risk factor is important for describing aggregate stock market returns in Malaysia. Additionally, these market returns are positively correlated with the crude palm oil price and the Singapore stock market index. This study shall thus shed new light on the application of the multifactor asset pricing model in Malaysia.
Multifactor Asset Pricing Model Incorporating Coskewness And Cokurtosis
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Author : Nathee Naktnasukanjn
language : en
Publisher:
Release Date : 2015
Multifactor Asset Pricing Model Incorporating Coskewness And Cokurtosis written by Nathee Naktnasukanjn and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Multifactor Models Do Not Explain Deviations From The Capm
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Author : Archie Craig MacKinlay
language : en
Publisher:
Release Date : 1994
Multifactor Models Do Not Explain Deviations From The Capm written by Archie Craig MacKinlay and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Capital categories.
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.
Multifactor Asset Pricing Model Evidence From Hotel Stocks And Lodging Real Estate Investment Trusts
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Author : Fahad Almudhaf
language : en
Publisher:
Release Date : 2020
Multifactor Asset Pricing Model Evidence From Hotel Stocks And Lodging Real Estate Investment Trusts written by Fahad Almudhaf and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
The main objective of this study is to examine the performance of hotel stocks and lodging real estate investment trusts (REITs) by estimating the recent Fama-French five-factor model (including investment and profitability factors) with an additional momentum factor during the 2000-2015 period. Using multi-factor models, results show that lodging REITs under-perform hotel stocks in the United States, while the opposite is true in Japan. Our findings indicate that the momentum factor is significant in explaining variation of lodging returns in both the United States and Japan. Smaller lodging firms are generating higher returns than larger firms in the United States and Japan, on average. Operating profitability is strongly associated with average returns of hotel stocks and REITs in the United States. However, it seems that the investment factor plays an insignificant role in the asset pricing of lodging industry stocks and REITs. We find no evidence of the effectiveness of adding profitability and investment factors in Japan. Our results offer valuable investment insights that help lodging investors better understand the nature of their investments. Also, findings of the current study would benefit hotel owners who are considering both organizational structures (i.e., REITs vs. C-corps) and portfolio managers who are considering lodging for diversification purposes.
Multifactor Consumption Based Asset Pricing Models Using The Us Stock Market As A Reference
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Author : John Hunter
language : en
Publisher:
Release Date : 2014
Multifactor Consumption Based Asset Pricing Models Using The Us Stock Market As A Reference written by John Hunter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
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.
Financial Distress Market Anomalies And Single And Multifactor Asset Pricing Models
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Author : Syed I. Hussain
language : en
Publisher:
Release Date : 2008
Financial Distress Market Anomalies And Single And Multifactor Asset Pricing Models written by Syed I. Hussain and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Data snooping and the nature of the distress premium are unresolved issues for the Fama and French three-factor model. These are addressed using UK data to create and test the model on portfolios based on market anomalies. We explore the apparent distress premium identified in prior research with particular reference to negative book equity-to-market equity (BE/ME) stocks. Although neglected in the prior research, we argue that these stocks offer new insights into the nature of the distress premium. We conclude that the distress premium is real and the three-factor model is an improvement on CAPM for all portfolios tested including the negative (BE/ME) portfolio. Unlike other distressed portfolios there is no compensation with high abnormal returns for this portfolio.
Expected Returns In The Time Series And Cross Section
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Author :
language : en
Publisher:
Release Date : 2014
Expected Returns In The Time Series And Cross Section written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Empirical Asset Pricing
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Author : Wayne Ferson
language : en
Publisher: MIT Press
Release Date : 2019-03-12
Empirical Asset Pricing written by Wayne Ferson and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-03-12 with Business & Economics categories.
An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
