Fama-French three-factor model

master's thesis

• Author: Maja Koprčina
• Mentor: Boris Podobnik (mentor)
• Committee member: Boris Podobnik (predsjednik povjerenstva)
• Committee member: Miljenko Huzak (član povjerenstva)
• Committee member: Goran Muić (član povjerenstva)
• Committee member: Marko Erceg (član povjerenstva)
• Granter: University of Zagreb; Faculty of Science; (Department of Mathematics); Zagreb
• Defense date and country: 2018-03-06, Croatia
• Scientific / art field, discipline and subdiscipline: NATURAL SCIENCES; Mathematics

Abstract

The thesis tests the Fama and French Three-Factor Model on the Croatian stock market. The performance of the model is compared with that of the Capital Asset Pricing Model. Based on previous attempts of researchers to apply the three-factor model of Fama and French to developing markets, three different portfolio constructing procedures were chosen and compared. Additionally, the implications of using two different proxies for the market and two different return intervals are studied and compared. Overall, the size and the book-to-market factor add to the explanation of the cross-section of average stock returns provided by the market factor. Fama and French Three-Factor Model explains the cross-section of average stock returns in the Croatian market and provides a greater explanatory power in comparison with the Capital Asset Pricing Model. However, much of the common variation in stock returns still remains to be explained by additional factors that reflect the defining characteristics of the emerging markets.

Abstract (croatian)

Rad testira Fama-French trofaktorski model na Hrvatskom tržištu dionica. Performansa modela uspoređena je sa performansom CAPM-a. Na temelju prethodnih pokušaja primjene trofaktorskog modela Fame i Frencha na tržišta u razvoju, odabrana su i komparirana tri različita postupka formiranja portfelja. Nadalje, proučavaju se i usporeduju implikacije upotrebe dvaju različitih proxyja za tržište i dva različita intervala povrata. Sveukupno, veličina kompanije i book-to-market faktor dodatno doprinose nivou objašnjenje varijacije presjeka prosječnih povrata iznad onog koji daje sam tržišni faktor. Fama-French trofaktorski model objašnjava presjek prosječnih povrata dionica na hrvatskom tržištu i objašnjava veći dio varijacije u povratima nego CAPM. Ipak, preostao je dio zajedničke varijacije u povratima dionica koji bi se mogao objasniti dodatnim faktorima koji odražavaju ključna obilježja tržišta u razvoju.

• Keywords: Fama and French three-factor model; stock market; CAPM; Capital Asset Pricing Model
• Keywords (croatian): Fama-French trofaktorski model; tržište dionica; CAPM
• Language: english
• URN:NBN: urn:nbn:hr:217:234644
• Study programme: Title: Finance and Business Mathematics; Study programme type: university; Study level: graduate; Academic / professional title: magistar/magistra matematike (magistar/magistra matematike)
• Type of resource: Text
• File origin: Born digital
• Access conditions: Open access; Embargo expiration date: 2020-09-04
• Created on: 2018-09-04 10:26:30