A Comparative Evaluation of the Predictability of Fama-French Three-Factor Model and Chen Model in Explaining the Stock Returns of Tehran Stock Exchange
Journal Title: International Journal of Academic Research in Accounting, Finance and Management Sciences - Year 2013, Vol 3, Issue 3
Abstract
Investors ought to select among different choices and various opportunities which are based on different characteristics and returns. The ultimate goal of most stakeholders, managers and other decision makers of the stock markets are acquiring expected return which is accompanied by risk. This is the reason for the necessity of the balance between risk and return. It is then required to design a model which can satisfactory predict the expected return. The present paper intends to use the two models of three-factor Fama- French and Chen model to contribute the decision makers in investigating the predictability of these two models for selecting the optimum expected return. The sample is composed of 52 listed firms on the Tehran Stock Exchange for the years of 2003 to 2010 which are selected by filtering technique. The gathered data is analyzed by applying multivariate regression method. The findings reveal that the Fama-French model has higher ability in predicting the expected stock return in the capital markets.
Authors and Affiliations
Hamid Reza Vakilifard, Forough Heirany
Keywords
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- EP ID EP130753
- DOI 10.6007/IJARAFMS/v3-i3/62
- Views 110
- Downloads 0
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