Empirical Test of Fama and French Three-Factor Model in the Egyptian Stock Exchange

Abd-Alla, Mustafa Hussein; Sobh, Mahmoud

doi:10.5817/fai2020-2-1

Cited by 5 publications

(3 citation statements)

References 21 publications

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“…The research subjects of Abd-Alla and Sobh chose the Egyptian Stock Exchange to test the validity of the FF3 model. The results of the study overturn the null hypothesis, and both SMB and HML factors are redundant, proving that there is no small-cap effect and book-to-market effect in this market [6].…”

Section: Related Researchmentioning

confidence: 59%

Using Three-factor and Five-factor Models to Explore the Impact of the Covid-19 on the US Stock Health Care Industry

Xiang¹

2022

BCPBM

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Based on the Fama-French three and five factor models, this paper empirically studies the changes in the healthcare industry in the U.S. stock market before and after the epidemic. The results show that the explanatory power of the two models after the epidemic has increased, the influence of market factors has been reduced, the "small-scale" effect of the US stock health care industry has increased, and the market has more preference for growth stocks, and the profitability factor has become significantly affected by the epidemic. The investment style factor is redundant. The medical industry after the epidemic still has investment value.

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Section: Related Researchmentioning

confidence: 59%

Using Three-factor and Five-factor Models to Explore the Impact of the Covid-19 on the US Stock Health Care Industry

Xiang¹

2022

BCPBM

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“…The only related measure of risk is systematic risk, measured via beta. The expected return on risky assets is estimated to be positively associated with beta, where beta predicts how the rate of return on the stock or portfolio will move relative to the movement of the market portfolio (Abd-Alla & Sobh, 2020;Sutrisno & Nasri, 2018). In the CAPM model, the market portfolio is very influential because it assumes that the relevant risk is systematic as measured by beta (the level of sensitivity of security returns to changes in market returns).…”

Section: Environmental Social and Governance (Esg)mentioning

confidence: 99%

How does ESG explain excess returns in emerging market? An Asset-Pricing Approach

Mulialim,

Madyan

2023

J. Theor. Appl. Manage.

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Objective: Previous studies found several important risk factors for the capital market in explaining stock performance. However, most studies only consider conventional investment factors without considering sustainable ones. This study examines Environmental, Social, and Governance (ESG) performance’s effect as a risk factor in a multi-factor model. Design/Methods/Approach: This study employs secondary data from the company’s financial reports, annual reports, and Thomson Reuters ESG score data. The sample for this study were companies listed on the LQ45 index during the 2015-2019 period, which were selected using the purposive sampling method and produced a selection of 19 non-financial companies that met the criteria. Findings: The results show that ESG negatively affects 21 out of 30 portfolios, and the four-factor ESG model is better at explaining excess returns than the three-factor Fama-French model. Originality/Value: This study provides new insights by including ESG as a risk factor in the three-factor Fama-French model in explaining stock returns. The existence of the ESG variable allows us to identify whether sustainability is an essential determinant in explaining the average portfolio return. This study adds new insights, where using sustainability reports in the form of ESG can capture cross-sectional variations in stock returns, not only on market factors, size factors, and book-to-market factors. Practical/Policy implication: Given the established evidence that ESG factors can mitigate risk, investors are encouraged to thoroughly evaluate a company’s sustainability report to assess the efficacy of its ESG performance. For managers of companies, this serves as the foundation for developing strategies that will enhance the long-term profitability and sustainability of the organization.

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“…model to interpret the expected return by using monthly data for stocks listed on the Saudi Stock Exchange form 2007 to 2011. The study that the Fama and French three-factor model has a statistically significant explanatory power to interpret the expected return of stocks greater than the capital asset pricing model (CAPM) Khasawneh (2017). examined the ability of bothFama and French (1993) model and (CAPM) model to predict the expected monthly return in the Omani stock market from July 2001 to April 2010.…”

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confidence: 99%

The Impact of Financial Leverage on the Pricing Risk in the Egyptian Stock Market

Abd-Allah,

Hamimy

2024

ISF

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This paper examines the impact of financial leverage on the risk pricing in the Egyptian Stock Exchange (EGX) by adding an additional risk factor reflecting financial leverage to the three factor model of Fama and French. We used monthly excess stock returns of 50 stocks listed on the (EGX) from January 2014 to December 2018 to test Fama and French model before and after adding the financial leverage factor. Total debt to equity ratio was used to calculate the financial leverage. The results do not support Fama and French model before and after adding the financial leverage factor, therefore there is no effect of financial leverage on the risk pricing.

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Empirical Test of Fama and French Three-Factor Model in the Egyptian Stock Exchange

Cited by 5 publications

References 21 publications

Using Three-factor and Five-factor Models to Explore the Impact of the Covid-19 on the US Stock Health Care Industry

Using Three-factor and Five-factor Models to Explore the Impact of the Covid-19 on the US Stock Health Care Industry

How does ESG explain excess returns in emerging market? An Asset-Pricing Approach

The Impact of Financial Leverage on the Pricing Risk in the Egyptian Stock Market

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