Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns
Successful investment requires identifying influential investment factors, its related risks and allocating optimal resources to obtain the highest returns. Individuals and institutional investors employ strategies to obtain additional return. One of these strategies is to determine the factors affe...
| Main Authors: | , |
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| Format: | Article |
| Language: | fas |
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Allameh Tabataba'i University Press
2017-04-01
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| Series: | فصلنامه پژوهشهای اقتصادی ایران |
| Subjects: | |
| Online Access: | https://ijer.atu.ac.ir/article_7970_da5623e4d40e0a40ee4399f4d6122d09.pdf |
| _version_ | 1827393197318340608 |
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| author | javad ramezani Yahya Kamyabi |
| author_facet | javad ramezani Yahya Kamyabi |
| author_sort | javad ramezani |
| collection | DOAJ |
| description | Successful investment requires identifying influential investment factors, its related risks and allocating optimal resources to obtain the highest returns. Individuals and institutional investors employ strategies to obtain additional return. One of these strategies is to determine the factors affecting risk and return in investment processes. This paper aims at examining the explanatory power of stock returns through the six-factor model and comparing Fama–French five-factor model, Carhart four-factor and Hou, Xue, Zhang (HXZ) q-factor models to determine the expected return on stocks of listed companies in Tehran Stock Exchange. Monthly data from the listed companies from 2002 to 2016 reveals that Fama–French five-factor model can explain stock returns better than Carhart four-factor model and HXZ six subscales. More importantly, adding momentum to the five-factor model did not increase the explanatory power. Also, the study showed that there were not significant results regarding Fama-french five-factor model of the value factor (HML) in Tehran Stock Exchange. Therefore, adding two factors of investment and profitability increases the explanatory power of the model. |
| first_indexed | 2024-03-08T17:44:44Z |
| format | Article |
| id | doaj.art-3d31ab985d3d4b10bbbcd115cf86aa0d |
| institution | Directory Open Access Journal |
| issn | 1726-0728 2476-6445 |
| language | fas |
| last_indexed | 2024-03-08T17:44:44Z |
| publishDate | 2017-04-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | فصلنامه پژوهشهای اقتصادی ایران |
| spelling | doaj.art-3d31ab985d3d4b10bbbcd115cf86aa0d2024-01-02T10:29:24ZfasAllameh Tabataba'i University Pressفصلنامه پژوهشهای اقتصادی ایران1726-07282476-64452017-04-01227020723110.22054/ijer.2017.79707970Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returnsjavad ramezani0Yahya Kamyabi1Ph.D. Student. Accounting Department, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.Assistant Professor, Accounting Department, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, IranSuccessful investment requires identifying influential investment factors, its related risks and allocating optimal resources to obtain the highest returns. Individuals and institutional investors employ strategies to obtain additional return. One of these strategies is to determine the factors affecting risk and return in investment processes. This paper aims at examining the explanatory power of stock returns through the six-factor model and comparing Fama–French five-factor model, Carhart four-factor and Hou, Xue, Zhang (HXZ) q-factor models to determine the expected return on stocks of listed companies in Tehran Stock Exchange. Monthly data from the listed companies from 2002 to 2016 reveals that Fama–French five-factor model can explain stock returns better than Carhart four-factor model and HXZ six subscales. More importantly, adding momentum to the five-factor model did not increase the explanatory power. Also, the study showed that there were not significant results regarding Fama-french five-factor model of the value factor (HML) in Tehran Stock Exchange. Therefore, adding two factors of investment and profitability increases the explanatory power of the model.https://ijer.atu.ac.ir/article_7970_da5623e4d40e0a40ee4399f4d6122d09.pdffive factor fama-french modelmomentumsix factor modelvalue factor (hml) |
| spellingShingle | javad ramezani Yahya Kamyabi Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns فصلنامه پژوهشهای اقتصادی ایران five factor fama-french model momentum six factor model value factor (hml) |
| title | Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns |
| title_full | Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns |
| title_fullStr | Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns |
| title_full_unstemmed | Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns |
| title_short | Comparing the Six-Factor Model with Capital Asset Pricing Models in Explaining the Expected Investor Returns |
| title_sort | comparing the six factor model with capital asset pricing models in explaining the expected investor returns |
| topic | five factor fama-french model momentum six factor model value factor (hml) |
| url | https://ijer.atu.ac.ir/article_7970_da5623e4d40e0a40ee4399f4d6122d09.pdf |
| work_keys_str_mv | AT javadramezani comparingthesixfactormodelwithcapitalassetpricingmodelsinexplainingtheexpectedinvestorreturns AT yahyakamyabi comparingthesixfactormodelwithcapitalassetpricingmodelsinexplainingtheexpectedinvestorreturns |