SavedAdd your journal

Journals / Ankara Üniversitesi SBF Dergisi / 2008 / Cilt: 63 - Sayı: 2

The Viability of the Three-Factor Asset Pricing Model for the Istanbul Stock Exchange

Üç Faktörlü Varlık Fiyatlandırma Modelinin İstanbul Menkul Kıymetler Borsasında Uygulanabilirliği

Fazıl GÖKGÖZ
Pages
43–64
Publication Date
2022-10-11
DOI
—
🏛️Bibliographic metadata and full text access for this article are provided via DergiPark.
DergiPark Record ↗
✨

AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

Furthermore, it has been found out that the Three-Factor Model is viable in accordance with the evaluation of adjusted t-statistics regarding to 66 monthly cross-sectional regression results.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:It is of remarkable finding that not only the expected returns of market portfolio, but also size and book-to-market ratio (B/M) are efficacious in time varying analysis of stock returns.
📊
Key Findings & Data:Fama and French developed in 1996 the “Three-Factor Asset Pricing Model” via inserting the size and B/M factors to the standard CAPM.
💡
Conclusion & Impact:Furthermore, it has been found out that the Three-Factor Model is viable in accordance with the evaluation of adjusted t-statistics regarding to 66 monthly cross-sectional regression results.
🔬Design:Modeling & Simulation
📍Scope:2001-2006 Verileri
⚙️Variables:Domain Parameters

Abstract

It is of remarkable finding that not only the expected returns of market portfolio, but also size and book-to-market ratio (B/M) are efficacious in time varying analysis of stock returns. Fama and French developed in 1996 the “Three-Factor Asset Pricing Model” via inserting the size and B/M factors to the standard CAPM. In this study, the viability of the Three-Factor Model that widely applied in literature has been investigated on the basic ISE indices (industrial, services, real estate, financial, technology) within 2001-2006(2Q) period. Time series and cross-sectional regression analyses have been carried out so as to reveal the effectiveness of the model on the basic indices after having inserted the two factors that formed according to size and B/M criterions into the model. Time series regression analyses have pointed out that the Three-Factor Model could give statistically significant results. However, it has been observed in GRS F-tests that pricing errors (j) would not generate any statistical interference. Furthermore, it has been found out that the Three-Factor Model is viable in accordance with the evaluation of adjusted t-statistics regarding to 66 monthly cross-sectional regression results.

Özet

Hisse senedi getirilerinin zamana bağlı değişiminin analizinde, piyasa portföyünün getirisi haricinde portföy büyüklüğünün ve piyasa değeri/defter değeri (PD/DD) oranı da etkili olmaktadır. Standart Sermaye Varlıklarını Fiyatlandırma Modeli’ne (CAPM) belirtilen iki yeni faktörün ilave edilmesi suretiyle Fama ve French tarafından 1996 yılında “Üç Faktörlü Varlık Fiyatlandırma Modeli” geliştirilmiştir. Bu çalışmada, literatürde geniş uygulama alanı bulan Üç Faktörlü Modelin, 2001-2006 (ilk 6 aylık) dönemine ilişkin İMKB endeks verileri üzerindeki uygulanabilirliği araştırılmıştır. Modelin İMKB-Sınai, Hizmetler, Gayrimenkul, Menkul Kıymetler ve Teknoloji endeksleri üzerindeki geçerliliğinin test edilebilmesi amacıyla piyasa değeri ve PD/DD oranına göre oluşturulan portföylerin getirileri modelin içerisine ilave edilerek, zaman serisi ve kesit regresyonu analizleri gerçekleştirilmiştir. Zaman serisi regresyonu çalışmalarında; modelin seçilen endekslerde istatistiksel olarak anlamlı sonuçlar verdiği belirlenmiş olup, GRS F-testi uygulamalarında fiyatlandırma hataları (j) arasında girişimin bulunmadığı gözlemlenmiştir.

🔖

Cite This Article

GÖKGÖZ, F. (2022). The Viability of the Three-Factor Asset Pricing Model for the Istanbul Stock Exchange. Ankara Üniversitesi SBF Dergisi, Cilt: 63 - Sayı: 2, 43–64. https://ajindex.com/articles/443139

📄 Full Text PDF Viewer

📄

PDF görüntüleyici hazırlanıyor...

References (18)

  1. ARSHANAPALLI, B. / COGGIN, T.D. / DOUKAS, J. (1998), “Multifactor Asset Pricing Analysis of International Value Investment Strategies,” Journal of Portfolio Management,Summer: 10-23.
  2. BILLOU, N. (2004), “Tests of CAPM and Fama and French Three-Factor Model,” MBA Project (Canada: Simon Fraser University). BLACK, F. / JENSEN, M. / SCHOLES, M. (1972), “The Capital Asset Pricing Model: Some Emprical Tests,” Studies in Theory of Capital Markets (New York: Praeger): 79-121.
  3. COGGI, P./ MANESCU, B. (2004), “A Multifactor Model of Stock Returns with Stochastic Regime Switching,” Universität St. Galen Working Paper: 1-27.
  4. CONNOR, G. / SEHGAL, S. (2001), “Tests of the Fama and French Model in India,” Working Paper, May 2001: 1-23.
  5. DANIEL, K. / TITMAN, S. (1997), “Evidence on the Characteristics of Cross Sectional Variation in Stock Returns,” Journal of Finance, 52: 1-31.
  6. DAVIS, J.L. / FAMA, E.F. / FRENCH, K.R. (2000), “Characteristics and Average Returns: 1929 to 1997,” Journal of Finance, 56: 389-405.
  7. DIETHER, K. (2001), “GRS Reviews,” University of Chicago – Seminar Presentation: 1-17.
  8. FAMA, E.F. / FRENCH, K.R. (1992), “The Cross-Section of Expected Stocks Returns,” Journal of Finance, 47: 427-465.
  9. FAMA, E.F. / FRENCH, K.R. (1993), “Common Risk Factors in the Returns on Stocks and Bonds,” Journal of Financial Economics, 33: 3-56.
  10. FAMA, E.F. / FRENCH, K.R. (1995), “Size and Book-to-Market Factors in Earnings and Returns,” Journal of Finance, 50 /1: 131-155.
  11. FAMA, E.F. / FRENCH, K.R. (1996), “Multifactor Explanations of Asset-Pricing Anomalies,” Journal of Finance, 51/1:55-84.
  12. FAMA, E.F. / FRENCH, K.R. (1997), “INDUSTRY Costs of Equity,” Journal of Financial Economics,43: 153-193.
  13. FAMA, E.F. / FRENCH, K.R. (2000), “The Capital Asset Pricing Model: Theory and Evidence,” Journal of Economic Perspectives, 18: 25-46.
  14. FAMA, E.F. / FRENCH, K.R. (2004), “The Capital Asset-Pricing Model:Theory and Evidence,” Journal of Economic Perspectives, 25-46.
  15. FAMA, E.F. / MACBETH, J.D. (1973), “Risk, Return and Equilibrium: Emprical Tests,” Journal of Political Economy, 81:607-636.
  16. FANT, L.F./ PETERSON, D.R. (1995), “The Effect of Size, Book-to-Market Equity, Prior Returns, and Beta on Stock Returns: January versus the Remainder of the Year,” Journal of Financial Research, XVIII/2: 129-142.
  17. GAUNT, C. (2004), “Size and Book to Market Effects and the Fama-French Three Factor Asset Pricing Model: Evidence from the Australian Stock Market,” Accounting and Finance,44: 27-44.
  18. GIBBONS, M