Systematic Risk Determinants of Stock Returns after Financial Crisis: Evidence from United Kingdom

Journal of Finance and Investment Analysis, 5(1), 1-28. ISSN: 2241-0998 (print version), 2241-0996(online)

28 Pages Posted: 12 Mar 2018

See all articles by Dr Vu Quang Trinh (Rainy)

Dr Vu Quang Trinh (Rainy)

Newcastle University Business School

Dipesh Karki

University of Northumbria at Newcastle

Binam Ghimire

University of Northumbria at Newcastle

Date Written: March 1, 2016

Abstract

This paper provides an empirical analysis of FTSE100 stock returns during the period of 2009 to 2013 with an aim to assess the relevancy of Fama-French three factor model post financial crisis of 2008. FTSE100 index was chosen in particular as it is benchmark of the prosperity among UK stocks. Assortment of six portfolios S/L, S/M, S/H, B/L, B/M and B/H based on firm‟s size and book-to-market ratio was constructed as per guidelines of Fama- French model. The ordinary least square estimation showed consistently positive and significant in all observed portfolios.However the results indicated that excess market return is the dominant variable among three risk factors meanwhile size factor (SMB) was significant while explaining only small-scale portfolios returns but had no effect on the average returns of large-scale portfolio. Likewise value factor (HML) appeared to be somewhat effective only in case of high book-to-market stock portfolios. Thus the impact of book-to-market value on the average excess returns of these observed portfolios behave in an un-systematic manner.

Keywords: Stock market returns, stock exchanges, Fama and French, CAPM

JEL Classification: C1, C3, G3

Suggested Citation

Trinh (Rainy), Dr Vu Quang and Karki, Dipesh and Ghimire, Binam, Systematic Risk Determinants of Stock Returns after Financial Crisis: Evidence from United Kingdom (March 1, 2016). Journal of Finance and Investment Analysis, 5(1), 1-28. ISSN: 2241-0998 (print version), 2241-0996(online) , Available at SSRN: https://ssrn.com/abstract=3136691

Dr Vu Quang Trinh (Rainy) (Contact Author)

Newcastle University Business School ( email )

5 Barrack Road
NUBS
NEWCASTLE UPON TYNE, Tyne and Wear NE1 7RU
United Kingdom

Dipesh Karki

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

Binam Ghimire

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

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