Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK

Xfi Centre for Finance and Investment Working Paper No. 11/02

67 Pages Posted: 1 Nov 2011  

Alan Gregory

University of Exeter - Xfi Centre; University of Exeter Business School

Rajesh Tharyan

University of Exeter; University of Exeter Business School

Angela Christidis

University of Exeter Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2011

Abstract

The aim of this paper is to construct and test alternative versions of the Fama-French and Carhart models for the UK market. We conduct a comprehensive analysis of such models, forming risk factors using approaches advanced in the recent literature including value weighted factor components and various decompositions of the risk factors. We also test whether such factor models can at least explain the returns of large firms. Despite these various approaches, we join Michou, Mouselli and Stark (2007) and Fletcher (2010) in demonstrating that such factor models fail to reliably describe the cross-section of returns in the UK.

Suggested Citation

Gregory, Alan and Tharyan, Rajesh and Christidis, Angela, Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK (October 31, 2011). Xfi Centre for Finance and Investment Working Paper No. 11/02. Available at SSRN: https://ssrn.com/abstract=1951831 or http://dx.doi.org/10.2139/ssrn.1951831

Alan Gregory (Contact Author)

University of Exeter - Xfi Centre ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

University of Exeter Business School ( email )

Streatham Court
Xfi Building Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Rajesh Tharyan

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

University of Exeter Business School ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 4ST
United Kingdom
01392262544 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/about/whoswho/index.php?web_id=Rajesh_Tharyan

Angela Christidis

University of Exeter Business School ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 4ST
United Kingdom

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