TESTING THE VALIDITY OF FAMA FRENCH FIVE FACTOR ASSET PRICING MODEL: EVIDENCE FROM TURKEY

Feyyaz Zeren, Tayfun Yilmaz and Murat Belke
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Feyyaz Zeren: Department of International Trade and Finance, Yalova University, Turkey.
Tayfun Yilmaz: Department of Business Administration, Mehmet Akif Ersoy University, Turkey.
Murat Belke: Department of Economics, Mehmet Akif Ersoy University, Turkey.

Studii Financiare (Financial Studies), 2019, vol. 23, issue 2, 97-113

Abstract: Fama and French introduced a five-Factor Asset Pricing Model (FF5), adding a new perspective to asset pricing models in the literature in 2015. The aim of this paper is to investigate the validity of Fama French (2015) Five Factor Asset Pricing Model for 18 companies whose shares are listed in Istanbul Stock Market Sustainability Index. According to obtained findings, the coefficient of the profitability factor, from the new variables added to the three-factor model to build the FF5 asset pricing model, was positive and statistically significant, whereas the coefficient of investment factor was not statistically significant. As a result of the study covering 1995Q1-2017Q3 period, there was not enough evidence that the FF5 Model was valid for Istanbul Stock Market Sustainability Index. In this context, the model will not be beneficial for investors in the estimation of the returns of the companies in the Istanbul Stock Market Sustainability Index. Classification-JEL: C23, G12

Keywords: Fama French; Five-Factor Model; asset pricing; Istanbul Stock Market Sustainability Index (search for similar items in EconPapers)
Date: 2019
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