Fama and French Five-Factor Model with Emphasis on Firm's Life Cycle Hypothesis

In this study, firm's life cycle hypothesis in explaining returns using Fama and French Five-Factor Model, were studied. The study period is from 1388 to 1392 and was performed at the Tehran Stock Exchange. According to the financial statements (sales growth, capital expenditures) and firm's establishment year divided into three categories: growth firms, mature firms and stagnant firms and model was carried out in different category. Cramer Z test showed a significant difference in determining return in all firm's level as well as in different levels of firm's life cycle. Explanatory power of the independent variable in the model was different at different levels. Also, it can be confirmed that the firm's life cycle influencing explanatory returns by the market risk premium, size, ratio of book value to market value, profitability and investment and could influence on return explanation power by Fama and French Five-Factor Model.