Author

Year

Methodology Multivariate regression approach Sort 6 portfolio on size and book to market value Daily returns employed for the period from 2003 to 2007 The excess returns for each portfolio were regressed on market, size and value factors

Results This paper tried to explore the power of FF three factor model in an emerging market. The results were encouraging for the three factor model. Findings are consistent with most of the studies that suggested the validity of three factor model in emerging markets. Given these regression results it can be deduced that majority of results favor of FF three factor model at least in case of Karachi Stock Exchange. There are plausible explanations for these results. In emerging markets investors are more concerned about the trading volumes and size of the firm. Since, panics are common in such markets, The FF model is therefore robust after taking into account the time-variation in beta. The test must be extended across other stock exchanges.

2008 ELAHI Mirza Nawazish

Sunil K 2006 Bundoo

The share price and market index data for the study have been obtained from the Stock Exchange of Mauritius. Years 1997 to 2003. .

The Fama and French three factor model holds for the Stock Exchange of Mauritius. Both a size effect and a book-to-market equity are present on the SEM. The time variation in betas is priced, but the size and book-to-market equity effects are still statistically significant. We test the three factor model with a set of market portfolios and we show that all market portfolios capture the common variation in stock returns. However, only the valueweight market portfolio can explain the cross-section in the stock returns. Finally, we test the January effet in the French case and we show that there is no January effect for both the dependent variable (stock portfolios) and the

Souad AJILI*

2003

Test the three factor model of Fama and French and the Characteristic Model of Daniel and Titman (1997) on The French Stock Market over July 1976 to June 2001 period. Stocks are ranked by size and book to market ratios and then by ex-ante HML, SMB or Mkt loadings.

the three factor risk model predicts that the intercepts of regressions of the returns of these characteristicbalanced portfolios on the Fama and French factor portfolios are indistinguishable from zero. In contrast, the alternative hypothesis of the characteristic model says that these intercepts should be negative. rResults reveal that all the intercepts have t-statistics below two. These results are consistent

explanatory variables (the with the factor pricing market, HML and SMB). model and inconsistent with the characteristic-based pricing model.

People who want to invest in developing markets are much curious about the size of the business and volume of the trade. Asset Pricing Model is useful to deal with the dreads prevailing in financial market. An investor can obtain different results by applying single and multi-factor asset pricing models. According to study conducted by ELAHI Mirza Nawazish, Fama French Three Factor Model was considered effective for KSE. Usually, single factor model of portfolio management i.e. CAPM is used by the investors for equity and stock valuation. The presence of two additional risk factors warrants their inclusion for investment analysis. If fund manager wants to calculate additional risk premium or an investor wishes to make investment in small firms and value stocks with the aim of getting maximum yields. When additional factors are there, the equity and stock valuation will be diverged from single to multi factor asset pricing models. Bundoo suggested that three factor Fama French model holds for the Stock Exchange of
Mauritius. He conducted his empirical study on share price and market index data of the

emerging African stock markets for evidence of size and value premium. The outcomes for size and BE/ME effects were significant even when used time-varying betas for analysis. However, it must be cautioned that the results might be sample specific and the model should be evaluated across other stock exchanges for checking robustness.
SOUAD AJILI

advocated the Fama and

French three factors model explained the variations in stock returns in a better way than the CAPM. French stock market, where it had it explained greater explanatory power i.e. R2 than the CAPM. In the French case, adding HML and SMB portfolio returns to the market excess return as explanatory variables of stock returns gives better results (for slopes and adjusted( R2).