Profitability and Investment Factors for UK Asset Pricing Models

7 Pages Posted: 20 Oct 2014

See all articles by Eoghan Nichol

Eoghan Nichol

Dublin City University Business School

Michael M. Dowling

ESC Rennes School of Business

Date Written: October 17, 2014

Abstract

Empirical investigations of the Fama-French three-factor asset pricing model have produced decidedly mixed results, particularly outside of the US market. Two recently proposed alternative multifactor models share a common core of the addition of profitability and investment as factors, but differ in terms of implementation (Fama and French, 2014; Chen, Novy-Marx, and Zhang, 2011). Testing of these models is currently confined to the US market. In this letter we adapt and test these models for the UK and argue that the Fama-French five-factor profitability factor offers the most potential.

Keywords: asset pricing, profitability, investment, UK market

JEL Classification: G12

Suggested Citation

Nichol, Eoghan and Dowling, Michael M., Profitability and Investment Factors for UK Asset Pricing Models (October 17, 2014). Economics Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2511166 or http://dx.doi.org/10.2139/ssrn.2511166

Eoghan Nichol

Dublin City University Business School ( email )

Dublin 9
Ireland

Michael M. Dowling (Contact Author)

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

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