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The Size and Value effect of The Fama and French Three Factor Model. Do the variables remain meaningful or redundant? Evidence from the Swedish Stock market 2007-2016

Einstulen, Marcus LU (2021) NEKH03 20211
Department of Economics
Abstract
This thesis compared the explanatory power on excess return between the Capital Asset Pricing Model and the Fama and French Three Factor Model on the Swedish Market. Fur- thermore, an evaluation of the independent variables included in the Fama and French Three Factor Model was done. This was tested on a sample of 59 listed companies of the Stock- holm Stock Exchange between 2007 and 2015. A total of 16 value weighted portfolios a year were constructed, which were constructed based on the characteristics of the individual companies. Regressions were performed on each portfolio which showed that the Fama and French Three Factor Model outperform the CAPM in explaining returns. Independently the SMB factor contributes the most in explaining... (More)
This thesis compared the explanatory power on excess return between the Capital Asset Pricing Model and the Fama and French Three Factor Model on the Swedish Market. Fur- thermore, an evaluation of the independent variables included in the Fama and French Three Factor Model was done. This was tested on a sample of 59 listed companies of the Stock- holm Stock Exchange between 2007 and 2015. A total of 16 value weighted portfolios a year were constructed, which were constructed based on the characteristics of the individual companies. Regressions were performed on each portfolio which showed that the Fama and French Three Factor Model outperform the CAPM in explaining returns. Independently the SMB factor contributes the most in explaining excess return which was supported by the Goodness of fit and performed Students t-test. Hence the HML factor seem to be more redundant. (Less)
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author
Einstulen, Marcus LU
supervisor
organization
course
NEKH03 20211
year
type
M2 - Bachelor Degree
subject
keywords
Asset Pricing Model, Capital Asset Pricing Model, Fama and French Three Factor Model, Portfolio Theory, Swedish Stock Market, Regressions, Students t-test
language
English
id
9051951
date added to LUP
2021-07-05 13:31:06
date last changed
2021-07-05 13:31:06
@misc{9051951,
  abstract     = {{This thesis compared the explanatory power on excess return between the Capital Asset Pricing Model and the Fama and French Three Factor Model on the Swedish Market. Fur- thermore, an evaluation of the independent variables included in the Fama and French Three Factor Model was done. This was tested on a sample of 59 listed companies of the Stock- holm Stock Exchange between 2007 and 2015. A total of 16 value weighted portfolios a year were constructed, which were constructed based on the characteristics of the individual companies. Regressions were performed on each portfolio which showed that the Fama and French Three Factor Model outperform the CAPM in explaining returns. Independently the SMB factor contributes the most in explaining excess return which was supported by the Goodness of fit and performed Students t-test. Hence the HML factor seem to be more redundant.}},
  author       = {{Einstulen, Marcus}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Size and Value effect of The Fama and French Three Factor Model. Do the variables remain meaningful or redundant? Evidence from the Swedish Stock market 2007-2016}},
  year         = {{2021}},
}