Estimation of Expected Return: The Fama and French Three-Factor Model Vs. The Chen, Novy-Marx and Zhang Three- Factor Model
(2011) BUSM65 20111Department of Business Administration
- Abstract (Swedish)
- The study examines the adequacy of the measurement of the cross-section of expected stock returns on the London Stock Exchange of the recent three-factor model introduced by Chen, Novy-Marx and Zhang against that of the Fama and French three-factor model. The former model use factors in addition to the market factor based on profitability and investment while the latter model use factors based on size and book-to-market equity. The models are tested together with the CAPM on a number of anomalies based trading strategies. It is found that the three-factor models consistently outperforms the CAPM and that the model by Chen,
Novy-Marx and Zhang in general is not able to outperform the Fama and French three-factor model during the time... (More) - The study examines the adequacy of the measurement of the cross-section of expected stock returns on the London Stock Exchange of the recent three-factor model introduced by Chen, Novy-Marx and Zhang against that of the Fama and French three-factor model. The former model use factors in addition to the market factor based on profitability and investment while the latter model use factors based on size and book-to-market equity. The models are tested together with the CAPM on a number of anomalies based trading strategies. It is found that the three-factor models consistently outperforms the CAPM and that the model by Chen,
Novy-Marx and Zhang in general is not able to outperform the Fama and French three-factor model during the time period tested on the London Stock Exchange. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/2969645
- author
- Kilsgård, David and Wittorf, Filip
- supervisor
- organization
- course
- BUSM65 20111
- year
- 2011
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Fama and French Three-Factor Model, CAPM, Asset pricing, Anomalies, Cost of Equity, Chen, Novy-Marx and Zhang.
- language
- English
- id
- 2969645
- date added to LUP
- 2012-08-09 14:38:57
- date last changed
- 2012-08-09 14:38:57
@misc{2969645, abstract = {{The study examines the adequacy of the measurement of the cross-section of expected stock returns on the London Stock Exchange of the recent three-factor model introduced by Chen, Novy-Marx and Zhang against that of the Fama and French three-factor model. The former model use factors in addition to the market factor based on profitability and investment while the latter model use factors based on size and book-to-market equity. The models are tested together with the CAPM on a number of anomalies based trading strategies. It is found that the three-factor models consistently outperforms the CAPM and that the model by Chen, Novy-Marx and Zhang in general is not able to outperform the Fama and French three-factor model during the time period tested on the London Stock Exchange.}}, author = {{Kilsgård, David and Wittorf, Filip}}, language = {{eng}}, note = {{Student Paper}}, title = {{Estimation of Expected Return: The Fama and French Three-Factor Model Vs. The Chen, Novy-Marx and Zhang Three- Factor Model}}, year = {{2011}}, }