The Validity of Fama-French Four Factor Model in Istanbul Stock Exchange /

Download
2014
Bereket, Taylan
The aim of this thesis is to investigate the size, book-to-market ratio (B/M), and profitability patterns in average returns and testing the viability of Fama-French four factor model in Istanbul Stock Exchange (ISE) over the period between July 2004-June 2013. The comparative performances of capital asset pricing model (CAPM), Fama-French three factor model, and Fama-French four factor model will be examined. Each of these three models is regressed on two different sets of portfolios. That is, monthly excess returns of six size-B/M and eighteen size-B/M-profitability portfolios are used as dependent variables in time-series regressions following Fama-French methodology. Confronted with the excess returns of six portfolios, the three factor model outperforms both CAPM and four factor model based on the results of adjusted R-squared values, GRS-F test of Gibbons, Ross, and Shanken (1989) and mean absolute value of intercept terms. Confronted with the excess returns of eighteen portfolios, based on R-squared value and GRS, four factor model is superior to both models. However, regarding the mean absolute value of alphas, three factor model fares slightly better than four factor model. Thus, in the light of the statistical results, although four factor model is not rejected and proves its viability in ISE, it does not show a strong superiority to three factor model, which is in line with Fama and French results.

Suggestions

Cross sectional determinants of Turkish stock market returns
Çeliker, Umut; Rhoades, Seza; Department of Business Administration (2004)
This thesis analyzes the relationship between stock returns and firm-specific characteristics including market beta, size, book-to-market ratio, leverage, earnings yield, net sales-to-price ratio and prior return performance in Istanbul Stock Exchange during the period 1993-2003. Moreover, the predictability of some macroeconomic variables based on the stock market return behavior is investigated.
A Note on Cross Section of Stock Returns on the Istanbul Stock Exchange
Kayaçetin, Nuri Volkan; Güner, Zehra Nuray (Boğaziçi Üniversitesi, 2007-01-01)
This paper investigates the explanatory powers of firm size, book-to-market, sales-to-price, debt-toequity ratio, and dividend yield on the cross-section of returns on the Istanbul Stock Exchange (ISE). Our results indicate that each of these variables (except dividend yield), commands a significant return premium when included in a simple regression model with the highest premium being associated with sales-to-price ratio. Our results suggest that sales-to-price ratio and debt-to-equity ratio have higher e...
An Examination of betas for Borsa İstanbul
Koca, Onur; Oran, Adil; Department of Business Administration (2016)
This study aims to investigate the Betas, which is called as systematic risk and introduced by Capital Asset Pricing Model (CAPM), of stocks traded in Borsa Istanbul (BIST). Issues about Beta have been examined for many years and mainly focus on its estimation and stability. These topics set up the core of this thesis. The closing prices of 203 eligible stocks between 2005 and 2015 are used in the work and data is collected from Thomson Reuters. The estimation of Beta is performed in four different methods,...
The accuracy of earnings forecasts disclosed in IPO prospectuses: The case of the Turkish IPO companies
Bulut, Halil İbrahim; Er, Bünyamin (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2010-12)
This paper examines the accuracy of earnings forecasts made by Turkish IPO (Initial Public Offering) companies during the period 2002-2007. It is a voluntary requirement for Turkish IPOs to furnish earnings forecasts. Their accuracy is measured by forecast errors, absolute forecast errors and squared forecast errors in this paper. A number of company specific characteristics such as size, age, forecast interval, gearing, proportion of shares retained by owners and both auditing firm and underwriter reputati...
The effect of financial news on BIST stock prices: a machine learning approach
Kanmaz, Medet; Küçükşenel, Serkan; Department of Economics (2018)
This thesis examines the relationship between the price data of companies in different sectors in the Borsa Istanbul (BIST) stock exchange and the verbal data revealed in the financial news related to these companies. In this work, sentiment analysis, natural language processing and the effect of financial news on individual stock performances are studied with a simple and novel method. Sentiment analysis is created by automatically labelling the news for companies publicly traded in BIST as positive or neg...
Citation Formats
T. Bereket, “The Validity of Fama-French Four Factor Model in Istanbul Stock Exchange /,” M.S. - Master of Science, Middle East Technical University, 2014.