Factor Models And Applications To VietNam Stock Market

Abstract

The study examines the relevance of the Fama - French five factor model on real estate stocks in the Ho Chi Minh Stock Exchange (HOSE) from 2013-2017. It focuses on the significant level of explanation for the return of stocks of two new factors such as operating profitability and the investment factor. By using the time series regression, the research tested the model on 12 different portfolios. The market risk factor of Capital Asset Pricing Model (CAPM) is not statistically significant in explaining the return of each portfolio but all real estate stocks. Meanwhile, in two new factors of the Fama-French three factor model (FF3F), the value factor is sufficiently reliable to explain the model but the size factor is not. In contrary, the value factor of Fama-French five factor model (FF5F) is not statistically significant to explain the return of real estate stocks but the size factor is reliable enough to explain for each portfolio. Moreover, the operating profitability factor of FF5F is a negative relation and statistical significance to explain the model, but the investment factor is not. Keywords: Fama-French 5 factors model, Fama-French 3 factors model, CAPM, market risk, SMB, HML, RMW, CMA, and HOSE.