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The Fama-French five-factor model: Evidence from the Johannesburg Stock Exchange

The Fama-French five-factor model: Evidence from the Johannesburg Stock Exchange This study tests the effectiveness of the Fama and French (2015) five-factor model in explaining returns on the Johannesburg Securities Exchange (JSE). The five-factor model is compared to the traditional Fama-French three-factor model as well as other factor combinations. The results show that the size-value and size-profitability three-factor models best describe time-series returns when comparing models. The five-factor model best explains the cross-section of returns and, overall, the results identify a significant inverse size premium and negative relationship between beta and returns but find a significant value premium. The additional factors of profitability and investment contribute to explaining the returns on the JSE; however, profitability is more consistent than investment. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Investment Analysts Journal Taylor & Francis

The Fama-French five-factor model: Evidence from the Johannesburg Stock Exchange

Cox, Shaun; Britten, James
Investment Analysts Journal , Volume 48 (3): 22 – Jul 3, 2019
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The Fama-French five-factor model: Evidence from the Johannesburg Stock Exchange

Cox, Shaun; Britten, James
Investment Analysts Journal , Volume 48 (3): 22 – Jul 3, 2019

Abstract

This study tests the effectiveness of the Fama and French (2015) five-factor model in explaining returns on the Johannesburg Securities Exchange (JSE). The five-factor model is compared to the traditional Fama-French three-factor model as well as other factor combinations. The results show that the size-value and size-profitability three-factor models best describe time-series returns when comparing models. The five-factor model best explains the cross-section of returns and, overall, the results identify a significant inverse size premium and negative relationship between beta and returns but find a significant value premium. The additional factors of profitability and investment contribute to explaining the returns on the JSE; however, profitability is more consistent than investment.

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Publisher
Taylor & Francis
Copyright
© 2019 Investment Analysts Society of South Africa
ISSN
2077-0227
eISSN
1029-3523
DOI
10.1080/10293523.2019.1647982
Publisher site
See Article on Publisher Site

Abstract

This study tests the effectiveness of the Fama and French (2015) five-factor model in explaining returns on the Johannesburg Securities Exchange (JSE). The five-factor model is compared to the traditional Fama-French three-factor model as well as other factor combinations. The results show that the size-value and size-profitability three-factor models best describe time-series returns when comparing models. The five-factor model best explains the cross-section of returns and, overall, the results identify a significant inverse size premium and negative relationship between beta and returns but find a significant value premium. The additional factors of profitability and investment contribute to explaining the returns on the JSE; however, profitability is more consistent than investment.

Journal

Investment Analysts Journal – Taylor & Francis

Published: Jul 3, 2019

Keywords: asset pricing; Fama-French three-factor model; Fama-French five-factor model

References

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