An Empirical Study of the Multifactor Asset Pricing Models—Evidence from the UK Equity Market

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Abstract

This study constructs a UK version Fama-French asset pricing factors and portfolios. The Fama-French five factor model is augmented with a momentum factor to form the six-factor model. The performance of the Fama-French three-, Carhart four-, Fama-French five and six-factor models is comprehensively compared. The three- and four-factor models perform poorly comparing with the five-factor and six-factor models. The profitability factor appears to be a promising factor while the investment factor is redundant in the UK market. It is shown that a four-factor model that includes the market, value, momentum and profitability factors perform better than the other models in explaining the cross-sectional variation of stock returns.
Original languageEnglish
Publication statusAccepted/In press - 27 Feb 2017
Event2017 WHITE ROSE DOCTORAL TRAINING CENTRE ECONOMICS PHD CONFERENCE -
Duration: 7 Apr 20177 Apr 2017

Conference

Conference2017 WHITE ROSE DOCTORAL TRAINING CENTRE ECONOMICS PHD CONFERENCE
Period7/04/177/04/17

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