On the Validity of the Augmented Fama-French Four-Factor Model

27 Pages Posted: 17 Feb 2009

See all articles by Keith Lam

Keith Lam

University of Macau

Frank K. Li

Independent

Simon M. S. So

University of Macau

Date Written: February 15, 2009

Abstract

This study investigates the performance of four-factor asset pricing model using Hong Kong stock returns. Our four-factor model is constructed by adding a momentum facgtor into the Fama and French's (1993) three-factor model. We find that the four-factor model does well in explaining return variation using Hong Kong data. Our results show evidence that all the four factors are significant in the model and intercepts are not significant. In addition, the reasonably high values of adjusted R squared and the insignificance of an additional explanatory variable of residula standard deviation provide supportive evidence to the model. The robustness of the model is also checked for two effects: up- and down-market conditions and seasonal behavior.

Keywords: Fama-French, four-factor model, momentum, up and down markets, seasonality

JEL Classification: G12, G15

Suggested Citation

Lam, Keith and Li, Frank K. and So, Simon M. S., On the Validity of the Augmented Fama-French Four-Factor Model (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343781 or http://dx.doi.org/10.2139/ssrn.1343781

Keith Lam

University of Macau ( email )

Macau

Frank K. Li

Independent

Simon M. S. So (Contact Author)

University of Macau ( email )

Macau

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,334
Abstract Views
5,009
rank
16,199
PlumX Metrics