Comparison of CAPM, Three-Factor Fama-French Model and Five-Factor Fama-French Model for the Turkish Stock Market

Yasar Erdinc

A chapter in Financial Management from an Emerging Market Perspective from IntechOpen

Abstract: In this study, I try to test the capital asset pricing model (CAPM), three-factor Fama-French (3F-FF) model and five-factor Fama-French (5F-FF) model for the Turkish stock market. The sample is from June 2000 to May 2017. My results show that the five-factor model explains better the common variation in stock returns than the three-factor model and capital asset pricing model. Moreover, the CAPM has no power in explaining monthly excess returns of sorted portfolios. Although three-factor model seems to have significant coefficients, intercepts in this model have significant t-values indicating that the model has problems in explaining the portfolio returns. I use equal weight market portfolio for all the models in order to explain the cross-sectional variations in the stock returns.

Keywords: CAPM; three-factor Fama-French model; five-factor Fama-French model; Turkish stock market; size; book to market; profitability; investment (search for similar items in EconPapers)
JEL-codes: C88 E47 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ito:pchaps:120123

DOI: 10.5772/intechopen.70867

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