Test of Five factors Model; Evidence from Tehran Stock Exchange

Fama and French (2015) with the addition of two more elements - operating profitability and investment - developed their three-factor model and offered a new five-factor model. This study aimed to test the Fama-French five-factor model compared with the three-factor and four-factor models.
For this purpose, a sample of 184 companies listed in Tehran Stock Exchange during the years 1380 to 1393 is examined. For testing the model, Portfolio analysis and test of Gibbons et al (1989) is used.
The results of this study revealed that operating profitability and investment are able to explain the return of portfolio. Fama-French five-factor model explains the excess return better than other models in Tehran Stock Exchange. Then four-factor model in different portfolios, depending on the factors made them, have better performance than three-factor models.