A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

Tazi, O.; Aguenaou, Samir; Abrache, Jawad

doi:10.32479/ijefi.12685

Cited by 5 publications

(5 citation statements)

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“…In this study, Fama-French three factor model is also employed to predict stock expected return out of index expected return. This model is quite robust from empirical studies and validity is widely recognized [6,7]. Lastly, the model-based method in this study adopts the efficient frontier to illustrate the tradeoff between mean and variance of expected return, whose validity is also backed by relevant research [8,9].…”

Section: Introductionmentioning

confidence: 91%

Portfolio Management Based on TMT Sector: Comparative Study between Basic Qualitative and Model-Based Approach

Ding¹

2023

BCPBM

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Nowadays, more and more investment techniques are incorporating model-based techniques to facilitate portfolio management process; however, techniques that could predict future stock expected returns are relatively scarce. This study mainly focuses on using model-based methods to evaluate stocks in the TMT (Technology, Media, Telecom) sector based on historical data for the last four years. LSTM (Long Short-Term Memory) neural network and Fama-French three factor models are employed in this study to predict the future expected return of the stocks and further, evaluate whether the stock could come into the optimal portfolio. Efficient frontiers are drawn using the variance of expected return against the mean of future expected return. Then investment utility function is set up along with the efficient frontier to make optimizer to get the best weight of the optimal portfolio. To justify if the model-based approach is robust, comparative study is done between basic qualitative approach and model-based approach. Two parallel approaches will use different methods as well as metrics to evaluate the same set of competitor stocks and generate the optimal portfolio. The results have shown that both approaches have the same optimal portfolio and the model-based approach is justified. Thus, this quantitative model-based approach is robust and applicable for investment since it could generate consistent result as the basic qualitative approach and it is more explicit in data.

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Section: Introductionmentioning

confidence: 91%

Portfolio Management Based on TMT Sector: Comparative Study between Basic Qualitative and Model-Based Approach

Ding¹

2023

BCPBM

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“…Investor akan berusaha mendapatkan keuntungan tertentu dengan resiko rendah dengan pembentukan portofolio, terutama investasi pada sekuritas di pasar modal (Sudiyatno & Irsyad, 2011). Keputusan investasi sering dikaitkan dengan keuntungan yang akan didapat investor (Acaravci & Karaomer, 2017) dengan resiko yang melekat dari investasi tersebut. Maka dari itu, berbagai peneliti diseluruh dunia berupaya mencari disain paling tepat dalam mengkaitkan imbal hasil yg di inginkan investor dari aset investasi dengan risiko yang melekat (Amyulianthy et al, 2023).…”

Section: Pendahuluanunclassified

“…Five Factors model Fama and French (FF5F) menjelaskan excess return portofolio saham di Indonesia dengan lebih baik dibandingkan dengan Three Factors model Fama and French (FF3F). Beberapa peneliti yang menggunakan FF5F seperti (Acaravci & Karaomer, 2017) menemukan bahwa model ini tidak hanya menjelaskan dengan baik untuk Borsa Istanbul (BIST), tetapi juga dapat menjelaskan variasi pengembalian portofolio yang berlebihan. Temuan ini sejalan dengan penelitian (Yang et al, 2017) dan (Yufang, 2017).…”

Section: Pendahuluanunclassified

“…Dengan demikian, perusahaan dengan nilai AG rendah akan dikategorikan sebagai kelompok conservative, sementara perusahaan dengan nilai AG tinggi akan termasuk dalam kelompok aggressive. Formula yang digunakan pada kelompok Conservative Minus Aggressive (CMA) (Acaravci., 2017) Portofolio Conservative Minus Aggressive (CMA) kemudian dibagi menjadi enam portofolio yang diperoleh dari nilai Investment perusahaan (CMA) dan nilai kapitalisasi pasar perusahaan (SMB). Keenam portofolio tersebut terdiri dari SC dan BC yang masuk ke dalam kelompok perusahaan Conservative, sedangkan portofolio SM dan BM yang masuk ke dalam kelompok perusahaan medium, dan portofolio SA dan BA yang masuk ke dalam kelompok Aggressive.…”

Section: Conservative Minus Aggressive (Cma)unclassified

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Mampukah Model Enam Faktor Fama and French menggungguli Model Tiga Faktor Fama and French dengan Proksi Indeks Kompas 100

Dasril,

Indriati,

Pujiharta

et al. 2024

jrap

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accompanying risks, many researchers have attempted to find financial asset valuation models. One of the most popular ones today is the Fama and French model. The initial model introduced was the Fama and French 3-factor model, which encountered various failures in some emerging market capital markets. In response, Fama and French improved their model, transforming it into a 6-factor model by adding aspects of profitability, investment, and momentum. This adjustment aimed to capture the relationship between the returns of securities or portfolios formed with systematic risk. However, the Fama and French 6-factor model did not perform well in some emerging market capital markets. The objective of this research is to test the accuracy of the Fama and French 6-factor model in the Indonesian Capital Market from 2017 to 2021. The research method employed is multiple linear regression, forming portfolios based on the framework established by the Fama and French 6-factor model. The research findings indicate evidence that the Fama and French 6-factor model can explain the returns of the formed portfolios. Market risk, book-to-market ratio, and investment aspect significantly impact the performance of the formed portfolio returns.

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“…The CAPM is not perfect [11]. The FF three-factor model has the drawback of not accounting for substantial market anomalies [12].…”

Section: Literature Reviewmentioning

confidence: 99%

The plant-based milk market in the context of CAPM and three-factor model – the case of Oatly

Yin

2023

E3S Web Conf.

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The article examines the performance of Oatly, a plant-based food company, and the factors that influence its re-turns. Considering the CAPM and Fama-French three-factor models, tracking market volatility is a key factor for investors. The findings reveal that market risk significantly affects Oatly's performance, as shown by the positive relationship between the intercept and Mkt-RF. Investors must monitor market trends closely to make informed investment decisions. The analysis of Oatly's beta value indicates that it is a low-risk investment option, making it an attractive option for investors seeking stable returns. The study highlights the importance of investing in low-risk options, especially in the plant-based food industry. In conclusion, this study provides valuable insights into the determinants of Oatly's returns and offers a comprehensive understanding for investors seeking low-risk investments. Monitoring market trends and risks is essential for investors in the plant-based food sector, and this study serves as a useful guide for making informed investment decisions. Oatly's low-risk profile makes it an at-tractive investment option, and investors must stay vigilant and keep track of market changes to make the most of this opportunity. This study offers important insights that can help investors navigate the complex and dy-namic world of plant-based food investments.

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A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

Cited by 5 publications

References 25 publications

Portfolio Management Based on TMT Sector: Comparative Study between Basic Qualitative and Model-Based Approach

Portfolio Management Based on TMT Sector: Comparative Study between Basic Qualitative and Model-Based Approach

Mampukah Model Enam Faktor Fama and French menggungguli Model Tiga Faktor Fama and French dengan Proksi Indeks Kompas 100

The plant-based milk market in the context of CAPM and three-factor model – the case of Oatly

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