The Five-Factor Asset Pricing Model Tests and Profitability and Investment Premiums: Evidence from Pakistan

Fahad Ali, Muhammad usman Khurram and Yuexiang Jiang

Emerging Markets Finance and Trade, 2021, vol. 57, issue 9, 2651-2673

Abstract: Using an extensive sample of the Pakistani stock market over the 2003–2016 period, this paper is the first to evaluate and compare the performance of four most popular factor pricing models: the Fama and French three-factor model, Carhart’s four-factor model, the five-factor model proposed by Fama and French, and the six-factor model that adds momentum to the five-factor model. We also test different nested models and find that the five-factor model best explains the returns of anomaly portfolios and outperforms the other models. We note that the profitability factor significantly improves the description of average returns, whereas factor spanning tests show that the value and momentum factors are redundant for the Pakistani stock market. Our results are robust to alternative factor definitions, formation of test assets, and across sub-periods.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2019.1650738 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:57:y:2021:i:9:p:2651-2673

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2019.1650738

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().