The purpose of this research is to empirically evaluate the efficacy of Fama and French three factor model with respect to asset pricing and expected portfolio returns for stock in financial sector in Pakistan (listed on Karachi Stock Exchange (KSE)). Multivariate regression analysis is applied on the six portfolios made on the basis of size and book to market value. Monthly data of 20 banks were taken for the period of five years starting from January 2006 to December 2010. Results showed that for most of the portfolios the Fama and French three factor model explained the variations in returns.
Key words: Size premium, value premium, market premium, three factor model.
Copyright © 2021 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0