Comparison of the CAPM, the Fama-French Three Factor Model and Modifications (eBook)

Christoph Lohrmann (Autor)

eBook Download: PDF | EPUB

2015 | 1. Auflage
36 Seiten
GRIN Verlag
978-3-668-03223-1 (ISBN)

Infos

Seminar paper from the year 2014 in the subject Economics - Finance, grade: 6,0 (Schweizer Notensystem), University of Liechtenstein, früher Hochschule Liechtenstein, language: English, abstract: This paper is focused on comparing the Capital Asset Pricing Model, the Fama-French Three Factor model and two modified versions of the Fama-French Model in their ability to explain excess returns. The first modified model contains the same explanatory variables as the Fama-French Model but with an additional AR(1) process. The second modification contains instead of an additional AR(1) an AR(2) process. Evaluated by the adjusted R² and the Akaike information criterion, the Fama-French model yields a higher model-fit than the CAPM. The modified Fama-French Model with an AR(2) process leads to significant results for the twice lagged return in the model in four out of six tested portfolios. Therefore, the in-sample regression reveals a higher model-fit of the modified Fama-French model with AR(2) in comparison to the other three models. Since the results differ from a regression in the subsequent period, the results are most likely spurious. Nevertheless, the authors show the high-er model-fit of the Fama-French Three Factor Model in relation to the CAPM.

Produkt-Details

• Erscheint lt. Verlag: 18.8.2015
• Verlagsort: München
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre
• Schlagworte: CAPM • Comparison • Factor • Fama-French • Model • modifications • Three
• ISBN-10: 3-668-03223-8 / 3668032238
• ISBN-13: 978-3-668-03223-1 / 9783668032231