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

Business & Finance, Finance & Investing, Finance
Cover of the book Comparison of the CAPM, the Fama-French Three Factor Model and Modifications by Christoph Lohrmann, GRIN Publishing
View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart
Author: Christoph Lohrmann ISBN: 9783668032231
Publisher: GRIN Publishing Publication: August 18, 2015
Imprint: GRIN Publishing Language: English
Author: Christoph Lohrmann
ISBN: 9783668032231
Publisher: GRIN Publishing
Publication: August 18, 2015
Imprint: GRIN Publishing
Language: English

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.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

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.

More books from GRIN Publishing

Cover of the book Describing Music by Using Metaphors and Categorization by Christoph Lohrmann
Cover of the book 'Sleeping with the Enemy' (1991). Martin Burney as an example of Obsessive Compulsive Personality Disorder? by Christoph Lohrmann
Cover of the book Materials Handling And Packaging Field Research by Christoph Lohrmann
Cover of the book Nationalism in Quebec by Christoph Lohrmann
Cover of the book Ernesto Che Guevara ¿Ídolo, héroe o sólo un rebelde? by Christoph Lohrmann
Cover of the book An analysis of syntactic regularities in children's acquisition of language by Christoph Lohrmann
Cover of the book The influence of change management practices on the implementation of Compliance Management Systems in companies by Christoph Lohrmann
Cover of the book Analysis of Marketing Environment of Virgin Australia by Christoph Lohrmann
Cover of the book The role of Junk Bonds in Corporate Finance by Christoph Lohrmann
Cover of the book Garment Workers in New York City's Chinatown after 1965 by Christoph Lohrmann
Cover of the book Joseph Stalin's Life and Political Power. The Man and the Symbol by Christoph Lohrmann
Cover of the book States are essential elements in the constitution of our freedom. Discuss. by Christoph Lohrmann
Cover of the book Pakistan - Die Herausforderung des Terrorismus im Atomstaat by Christoph Lohrmann
Cover of the book Leasing - 'It is the use of equipment, not the ownership, that generates profit' by Christoph Lohrmann
Cover of the book Empirical Evidence on IPO-Underpricing by Christoph Lohrmann
We use our own "cookies" and third party cookies to improve services and to see statistical information. By using this website, you agree to our Privacy Policy