A Comparison between Fama-French Five Factor Model and Carhart Four-Factor Model in Explaining the Stock Return of Companies Listed in the Tehran Stock Exchange

predicting stock returns has been one of the most important financial market issues. In this paper, we compare the five-factor model of Fama and French model and four-factor model of Carhart to explain stock returns of listed companies in the Tehran Stock Exchange during 1387-1392. Carhart model variables include market risk premium, value, size and momentum. The variables included in the five factor model of Fama and French are market risk premium, value, size, momentum and profitability factors. The results show that there is a significant relation between stock return and market risk premium, size, and value factors. However, momentum and profitability do not show a significant relation with stock returns. In other words, the results show that in the Tehran Stock Exchange, Fama and French three-factor model is credible, while Carhart four-factor model and Fama and French five-factor model does not valid.