A statistical comparison of the capm, fama and French three factor model and carhart four factor model - Evidence from VietNam
Abstract
This study make statistical comparison among three widely used asset pricing models which are the traditional CAPM, Fama and French three factor model and Carhart four factor model using time series multiple regression on 224 stocks listed on Ho Chi Minh stock exchange in the period of 6 years from January 2011 to December 2016. By combining three statistical indicators coefficients, adjusted R squares and PRESS statistics, this study helps investors find out some useful facts about these asset pricing models and effects of market risk premium, size, B/M ratio and momentum factor in Vietnam market. First, among three asset pricing model, Fama and French three factor model together with Carhart four factor model performs better than CAPM is term of both goodness of fit and prediction. Second, the selection of Fama and French three factor model and Carhart four factor model is flexible due to the stocks and portfolios applied. Third, market risk premium, size and value of B/M ratio gives positive relationship with stocks return while momentum factor is not well-captured in such an emerging market.
Keywords: statistical comparison, CAPM, Fama and French three factor model, Carhart four factor model.