Choosing Factors for the Vietnamese Stock Market

Nina Ryan, Xinfeng Ruan, Jin E. Zhang and Jing A. Zhang
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Nina Ryan: Faculty of Business Evaluation, Pacific International Hotel Management School, New Plymouth 4372, New Zealand
Xinfeng Ruan: Department of Accountancy and Finance, Otago Business School, University of Otago, Dunedin 9054, New Zealand
Jin E. Zhang: Department of Accountancy and Finance, Otago Business School, University of Otago, Dunedin 9054, New Zealand
Jing A. Zhang: Department of Management, Otago Business School, University of Otago, Dunedin 9054, New Zealand

JRFM, 2021, vol. 14, issue 3, 1-23

Abstract: In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.

Keywords: Fama–French factor model; asset pricing tests; state ownership; SOE; emerging market; Vietnam (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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