Pricing Ability of Carhart Four-Factor and Fama–French Three-Factor Models: Empirical Evidence from Morocco

Mimoun Benali, Karima Lahboub () and Abdelhamid El Bouhadi
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Mimoun Benali: Laboratory of Research and Studies in Management, Entrepreneurship and Finance (LAREMEF), National School of Commerce and Management of Fez, Sidi Mohamed Ben Abdellah University, Fes 30050, Morocco
Karima Lahboub: Laboratory of Research and Studies in Management, Entrepreneurship and Finance (LAREMEF), National School of Commerce and Management of Fez, Sidi Mohamed Ben Abdellah University, Fes 30050, Morocco

IJFS, 2023, vol. 11, issue 1, 1-14

Abstract: In this study, the reliability of the Fama–French Three-Factor model (FF3F) and the Carhart Four-Factor model (C4F) is examined thoroughly. In order to determine which of the asset pricing models is the best to explain portfolio returns on the Moroccan share market, these two models are indeed evaluated in the Moroccan market. Additionally, it is worth mentioning that five years of monthly data from the firms that listed on the Casablanca Stock Exchange are used in this research, as well over the period of nine years. The results of this inquiry show that these models barely have a partial hold on the Casablanca Stock Exchange (CSE), which limits their ability to predict the cross-sections of returns. In accordance with this, the C4F model has somewhat greater explanatory power than the FF3F Model. Moreover, our research adds to the body of knowledge by inserting two learned material asset pricing theories to the proof in the market, which is still evolving, and where distinctive anomalistic traits still exist (the CSE).

Keywords: emerging market; capital asset pricing model; Carhart four-factor model; Casablanca stock exchange; Fama-French (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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