Comparison of a modified and classic Fama-French model for the Polish market
Comparison of a modified and classic Fama-French model for the Polish market
Author(s): Stanisław UrbańskiSubject(s): National Economy, Business Economy / Management
Published by: Wydawnictwo Naukowe Uniwersytetu Szczecińskiego
Keywords: ICAPM applications; Fama-French model; return simulation; systematic risk; price of risk; market portfolio;
Summary/Abstract: This paper shows a comparison of the results of return, risk, and risk price simulation by a modified and classic Fama-French model. The modified model defines the new ICAPM state variable as a function of the structure of a company’s past financial results. The model tests are run on the basis of stocks listed on the Warsaw Stock Exchange. In light of the classic model the risk price, on the tested market, turned out univariate due to HML, however, in light of the modified model, risk price turned out to be threedimensional due to the proposed factors, and market portfolio. The factors of the modified model, compared with the HML and SMB, are widely perceived by portfolio managers, and the simulation results indicate a greater possibility to use this pricing application by large institutional investors.
Journal: Folia Oeconomica Stetinensia
- Issue Year: 17/2017
- Issue No: 1
- Page Range: 80-96
- Page Count: 17
- Language: English