The robustness of the Fama-French four-factor model: Evidence from the Philippine stock market

Date of Publication

2010

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Stephanie Chan

Defense Panel Chair

Liberty S. Patiu

Defense Panel Member

Alfredo M. Santoyo
Vivian Y. Eleazar

Abstract/Summary

This paper aims to study the applicability of the Fama-French model in the Philippine stock market. Specifically, the researchers focused on verifying the existence of market anomalies such as size, value, and momentum effect by employing a time series regression. Also, the researchers intend to compare the explanatory power of the three factor versus four factor Fama-French model. Monthly stock returns were computed for the years 2000 to 2009 and portfolios were formed following Fama and French (1992) and Carhart (1997). Bust instead of regressing the monthly returns, the researchers used the coefficient of variation.The regression results indicate that there exists a strong size effect wherein small stock portfolios outperform big stock portfolios. However, in contrast to Fama and French's findings, only the small stock portfolios exhibit a weak value effect while the big stock portfolios are observed to have a growth effect where low book-to-market firms outperform high book-to-market firms. On the other hand, the momentum effect is not documentyed in the Philippine equities market since the results are mostly insignificant. Finally, using the F-test, the researchers conclude that the four factor model is not better than the three factor model in explaining the variation in average expected stock returns.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU17155

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

45, [60] leaves

Keywords

Stock exchanges--Philippines; Stocks--Philippines

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