Explaining Alternative Asset Pricing Models To Predict Expected Stock Returns

Significant equity investment depends on the value of the expected yield is anticipated. capital assets Pricing of important topics in this section is using pricing models are possible. As the first non-conditional CAPM model by Sharp and consequently the development of the standard three-factor model of Fama and French three factors Chen, Carhart four-factor, five-factor Fama and French have been introduced in this area. The explanatory power of the model using the coefficient of determination is compared with Theil Test Sample consisting of 108 companies during 1386 to 1394 were selected. To test the hypotheses, a hybrid approach to data analysis and multivariate regression was used The results showed that the five-factor model of all models with the lowest prediction error (1.395) and the highest coefficient of determination (71.6%), so the five factors in explaining the relationship between risk and returns than its predecessor model has high explanatory power Is. Also, adding two three-factor model of investment and profitability to increase the explanatory power of the model. These results correspond with the findings of Fama and French 2015 Fama-French research impact, however, that the value factor (HML) on stock returns was not significant and was known as an explanatory variable waste.