Evidence to support the four-factor pricing model from the Canadian stock market

L’Her, Jean-François; Masmoudi, Tarek; Suret, Jean‐Marc

doi:10.1016/j.intfin.2003.09.001

Cited by 85 publications

(29 citation statements)

References 39 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The WMLt denotes the difference between returns on diversified winner and loser portfolios during the previous year. The model was developed by Carhart [1997] and was later tested by Jegadeesh [2000], Liew and Vassalou [2000], Kim [2003], L'Her, Masmoudi, andSuret [2004], Bello [2007], and Lam, Li, and So [2009].…”

Section: Research Methods and Asset Pricing Modelsmentioning

confidence: 99%

Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?

Zaremba

Konieczka

2017

International Journal of Management and Economics

View full text Add to dashboard Cite

This paper tests the performance of the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor and Carhart four-factor models on the Polish market. We use stock level data from April 2001 to January 2014 and find strong evidence for value and momentum effects, but only weak evidence for size premium. We formed portfolios double-sorted on size and book-to-market ratios, as well as on size and momentum, and we explain their returns with the above-mentioned asset pricing models. The CAPM is rejected and the three-factor and four-factor models perform well for the size and B/M sorted portfolios, but fail to explain returns on the size and momentum sorted portfolios. With the exception of the momentum factor, local Polish factors are not correlated with their European and global counterparts, suggesting market segmentation. Finally, the international value, size and momentum factors perform poorly in explaining crosssectional variation in stock returns on the Polish market.

show abstract

Section: Research Methods and Asset Pricing Modelsmentioning

confidence: 99%

Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?

Zaremba

Konieczka

2017

International Journal of Management and Economics

View full text Add to dashboard Cite

show abstract

“…In order to enable the calculation of the momentum factor, the stocks were sequenced as the t year's July and t-1 year's June and their performances between the months of t-2 and t-12 were taken into consideration (Fama and French, 2007, L'Her;Masmoudi;Suret, 2004, Lam;Li;So, 2009). The stocks were divided into two groups according to their size measurements, which are S (small) for 50% and B (big) again for 50%.…”

Section: Data Structure and Methodsmentioning

confidence: 99%

“…When the literature is examined, it is seen that very small number of studies paid regard to the power of adding the momentum factor to SMB and HML factors of Fama and French (WML-winners minus losers) in explaining stock returns. (Carhart 1997, Jegadeesh 2000, Liew and Vassalou 2000, Kim and Kim 2003 Asian Journal of Finance & Accounting ISSN 1946-052X 2013 Masmoudi; Suret 2004, Bello 2007, Carmichael and Coën 2008Li;So 2009;Unlu, 2012). The four factor model was first tested by Carhart (1997).…”

Section: The Four-factor Modelmentioning

confidence: 99%

“…Whereas this study represents an evidence for the WML factor, the findings obtained are not as strong as the SMB and HML factors. By using monthly data, L'Her, Masmoudi and Suret (2004) looked into the power of four factors, which are R m -R f , SMB, HML and WML, to explain stock returns during the period of 1960 -2001 for the Canadian equity market. It was concluded that the four-factor model was valid for the Canadian Market.…”

Section: The Four-factor Modelmentioning

confidence: 99%

See 1 more Smart Citation

Evidence to Support Multifactor Asset Pricing Models: The Case of The Istanbul Stock Exchange

Ünlü

2013

AJFA

View full text Add to dashboard Cite

The objective of this study is to test, instead of the single factor CAPM, the power of three factor, four factor and five factor models to explain stock returns for the Istanbul Stock Exchange (ISE). The test results of all models in the ISE indicate that the models are applicable. During the period covering July 1992-June 2011 it is consequently established that, in addition to the market risk, size, book to market ratio, momentum and liquidity factors also constitute significant risk factors that affect the expected stock returns in the ISE and that the risk premiums belonging to these five factors are priced by the market.

show abstract

“…One of the few articles on a multifactor asset-pricing model for Canadian portfolios -using exclusively Canadian factors -is L'Her, Masmoudi and Suret (2004); see also the references therein. We extend this literature to verify on a long time period the importance of domestic Fama-French factors to price Canadian 2.…”

mentioning

confidence: 99%

Identification-Robust Factor Pricing: Canadian Evidence

Beaulieu

Dufour

Khalaf

2016

View full text Add to dashboard Cite

We analyze factor models based on the Arbitrage Pricing Theory (APT). using identification-robust inference methods. Such models involve nonlinear reduced-rank restrictions whose identification may raise serious non-regularities and lead to a failure of standard asymptotic theory. We build confidence sets for structural parameters based on inverting Hotelling-type pivotal statistics. These confidence sets provide much more information than the corresponding tests. Our approach may be interpreted as a multivariate extension of the Fieller method for inference on mean ratios. We also introduce a formal definition for a redundant factor linking the presence of such factors to unbounded confidence sets, and we document their perverse effects on minimum-root-based model tests.Results are applied to multifactor asset-pricing models with Canadian data, the Fama-French-Carhart benchmarks and monthly returns of 25 portfolios from 1991 to 2010. Despite evidence of weak identification, several findings deserve notice when data are analyzed over ten-year subperiods. With equally weighted portfolios, the three-factor model is rejected before 2000, but weakly supported thereafter. In contrast, the three-factor model is not rejected with value-weighted portfolios. Interestingly in this case, the market factor is priced before 2000 along with size, while both Fama-French factors are priced thereafter. The momentum factor severely compromises identification, which calls for caution in interpreting existing work documenting momentum effects on the Canadian market. This empirical analysis underscores the practical usefulness of our analytical confidence sets

show abstract

Evidence to support the four-factor pricing model from the Canadian stock market

Cited by 85 publications

References 39 publications

Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?

Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?

Evidence to Support Multifactor Asset Pricing Models: The Case of The Istanbul Stock Exchange

Identification-Robust Factor Pricing: Canadian Evidence

Contact Info

Product

Resources

About