mdh.sePublications
Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Empirical Researches of the Capital Asset Pricing Model and the Fama-French Three-factor Model on the U.S. Stock Market
Mälardalen University, School of Business, Society and Engineering.
Mälardalen University, School of Business, Society and Engineering.
2013 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The aim of this paper is to use the US stock market index to construct different portfolios and test the possible differences in the validity between the capital asset pricing model (CAPM) and the Fama and French three-factor model for the US market. We perform a comprehensive analysis of the two models, and form risk factors that are applied with advanced methods from recent literatures. By using the tool of MS EXCEL 2007, we estimate regression equations and test which factor model can better explain the return of stock. We use a time-series regression approach and different hypotheses tests to check the statistical significance of key parameters (intercepts, market beta, SMB beta, HML beta). We also examine whether the Ordinary Least Squares (OLS) assumptions are fulfilled. Furthermore, we compare the estimated parameters from the different models and check which model has a better explanation on the relationship between risk factors and stock returns. The paper concludes that our testing results show that the Fama and French three-factor model has more explanatory power than the single-factor CAPM, in explaining the variation of the stock returns. We also find that the market beta is the key factor, no matter if we look at the capital asset pricing model or the FF three-factor model.

Place, publisher, year, edition, pages
2013. , 36 p.
Keyword [en]
expected return and risk, single-factor CAPM, Fama-French three-factor model, OLS regression
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:mdh:diva-19273OAI: oai:DiVA.org:mdh-19273DiVA: diva2:629540
Subject / course
Economics
Presentation
2013-06-04, R2-216, Högskoleplan 1, Västerås, 09:15 (English)
Supervisors
Examiners
Available from: 2013-06-27 Created: 2013-06-17 Last updated: 2013-06-27Bibliographically approved

Open Access in DiVA

Empirical Researches of the Capital Asset Pricing Model and the Fama-French Three-factor Model on the U.S. Stock Market(9398 kB)4140 downloads
File information
File name FULLTEXT01.pdfFile size 9398 kBChecksum SHA-512
0dede6478495883bf5e82c6502545bdf823d58f124a404e51e61fe1d6a78a6754fe2ff6e2c1e8441e0c1b5e9605fe133cdc74d5efadcd041c1e5035b21607d77
Type fulltextMimetype application/pdf

By organisation
School of Business, Society and Engineering
Social Sciences

Search outside of DiVA

GoogleGoogle Scholar
Total: 4140 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 598 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf