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Title: Statistical understanding of the Farna-French factor model
Authors: CHUA YAN RU
Keywords: Fama French, PCA, CAPM
Issue Date: 26-Jul-2012
Citation: CHUA YAN RU (2012-07-26). Statistical understanding of the Farna-French factor model. ScholarBank@NUS Repository.
Abstract: Capital Asset Pricing Model (CAPM) has been one of the most well established and widely used asset-pricing models in the field of finance. However, the increase in empirical evidence contradicting the prediction of the CAPM lead to the development of the Fama and French (1993) three factor asset pricing model and other factor models. Fama and French three factor model extends the CAPM with the introduction of two additional factors, SMB (small minus big) and HML (high book-to-market equity minus low book-to-market equity), which incorporate size and book to market equity. In this thesis, we use Singapore stock market data from 1996 to 2009 to investigate the ability of the two models in explaining the variation in stock returns. Although we found statistically significant size and book-to-market effect, the market factor remains the main component that explains the most variation.
Appears in Collections:Master's Theses (Open)

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