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

43 Pages Posted: 27 Feb 2013

See all articles by Alan Gregory

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: January/February 2013

Abstract

This paper constructs and tests alternative versions of the Fama–French and Carhart models for the UK market with the purpose of providing guidance for researchers interested in asset pricing and event studies. 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. We find that versions of the four‐factor model using decomposed and value‐weighted factor components are able to explain the cross‐section of returns in large firms or in portfolios without extreme momentum exposures. However, we do not find that risk factors are consistently and reliably priced.

Keywords: asset pricing, multi factor models, CAPM, Fama–French model, performance evaluation, event studies

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 (January/February 2013). Journal of Business Finance & Accounting, Vol. 40, Issue 1-2, pp. 172-214, 2013, Available at SSRN: https://ssrn.com/abstract=2225662 or http://dx.doi.org/10.1111/jbfa.12006

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
816
PlumX Metrics