A Respecified Fama French Three‐Factor Model for the New European Union Member States

Foye, James; Mramor, Dusan; Pahor, Marko

doi:10.1111/jifm.12005

Cited by 36 publications

(18 citation statements)

References 33 publications

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“…14 We base our choice of the dependent variable on its ease of interpretation, as well as documented use both in financial analyses and academic research (e.g. Fama and French 1993, 2015Foye andMramor 2013, 2016). The extant literature also highlights P/E's utlisation among other commonly-used multiples such as price-to-earnings or price-to-sales ratios (as well as metrics based on cash flow, such as enterprise value relative to earnings before interest and taxes) in firm market valuation (see especially Lie and Lie 2002, Fama and French 2002, and Cheung et al 2009.…”

Section: Hypothesis 2: Effects Of Informal Institutions On Firm Vmentioning

confidence: 99%

Informal institutions and firm valuation

Hartwell

Malinowska

2019

Emerging Markets Review

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Research on the effects of the institutional environment on firm market valuation have concentrated on formal institutions and in particular legal frameworks. However, changes in formal institutions may have little to no effect on the deeply ingrained socioeconomic processes which determine the way of conducting business in a country. In such a situation, informal institutions may play a much more important role for firms. Using property rights as an example, this paper models the impact of formal and informal institutional changes on the market growth potential of Polish firms. Our examination indicates that Poland's formal and informal institutions diverge significantly, with changes in informal institutions shaping market worth much more than binding formal frameworks. We conclude that firm valuation in an unstable institutional environment is due mostly to developments in informal property rights and other factors external to the firm, with comparatively little effect of firm-specific attributes.

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Section: Hypothesis 2: Effects Of Informal Institutions On Firm Vmentioning

confidence: 99%

Informal institutions and firm valuation

Hartwell

Malinowska

2019

Emerging Markets Review

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“…Other works (Kothari et al, 1995;Daniel and Titman, 1997;Davis et al, 2000;Taneja, 2010;Manjunatha and Mallikarjunappa, 2011;Eraslan, 2013;Foye et al, 2013;Sehgal and Balakrishnan, 2013;Sharma and Mehta, 2013) show that:…”

Section: Literature Reviewmentioning

confidence: 97%

Size and Value Anomalies in European Bank Stocks

Fidanza¹,

Morresi²

2018

IJBM

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The Fama-French three-factor model (Fama & French, 1993) has been subject to extensive testing on samples of US and European nonfinancial firms over several time windows. The most accepted evidence is that size premium (SMB) and value premium (HML) other than the market risk premium help explain cross-section and time-series changes in stock returns. However, scholars have always paid little attention to the financial industry because of the intrinsic differences between financial and nonfinancial firms. The few studies that tested the model on financial firms found mixed evidence on the role of size and book-to-market ratio (B/M) in explaining stock returns. This paper tries to bridge the gap by testing the model on a sample of European financial firms. We find that size and B/M factors seem to be sources of undiversifiable risks and should therefore be included as risk premiums for estimating expected returns of financial firms. Small and high-B/M firms show higher returns that are not explained by market risk and the inclusion of SMB and HML helps improve the regression models’ goodness-of-fit.

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“…This issue is, however, debatable. For example, Foye, Mramor, and Pahor (2013) analyzed the new European Union members and found that the model of Fama and French (1993) has some serious disadvantages in such a context. Thus, some researchers have proposed modifications.…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of a time-varying risk premium in the Visegrad Group

Drachal¹

2016

MEST Journal

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The risk premium for the Visegrad countries was analyzed. The period of the considerations is between 2005 and 2015. Daily, weekly and monthly data outcomes were compared. It was found that the outcomes are quite similar for all countries. Moreover, changing to weekly or monthly data does not incorporate significantly new knowledge. Generally, daily data remain the best one to analysis. The historical period from which the stock market returns are computed was narrowed to just one calendar year (i.e., 250 stock session days). As a result, it was obtained that the risk premium varies from-70% up to 115%, whereas the average measures vary between and 1.89% and-10.46%. Generally, a negativity of a risk premium was confirmed. But, on the other hand, no leverage effect was found. Nor the significant impact of the company size. The models were based on GARCH types, i.e. AR-GARCH and GARCH in mean models were evaluated. The methods were restricted to simple GARCH(1,1) in case of the variance equations.

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A Respecified Fama French Three‐Factor Model for the New European Union Member States

Cited by 36 publications

References 33 publications

Informal institutions and firm valuation

Informal institutions and firm valuation

Size and Value Anomalies in European Bank Stocks

Analysis of a time-varying risk premium in the Visegrad Group

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