Does the Five-Factor Asset Pricing Model Have Sufficient Power?

Anupam Dutta

Global Business Review, 2019, vol. 20, issue 3, 684-691

Abstract: The central purpose of this article is to assess whether the newly developed five-factor model of Fama and French (2015) has sufficient power to identify the long-term abnormal performance of firms experiencing major corporate events. In order to check the robustness of the five-factor model, power of the Fama–French three-factor model (1993) has also been investigated. Simulations show that although the five-factor specification is more powerful than the three-factor specification, the extended model still lacks power. The findings further suggest that if the book-to-market factor is excluded from the five-factor model, the four-factor model documents almost similar power like the five-factor model. In addition, the power is found to be substantially reduced as the event period advances.

Keywords: Power of tests; Fama–French five-factor model; three-factor model; long-term abnormal performance (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0972150919837060 (text/html)

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:sae:globus:v:20:y:2019:i:3:p:684-691

DOI: 10.1177/0972150919837060

Access Statistics for this article

More articles in Global Business Review from International Management Institute
Bibliographic data for series maintained by SAGE Publications ().