African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4193

Full Length Research Paper

Fama and French three factor model: Empirical evidence from financial market of Pakistan

Zeeshan Hamid1, Ch Asad Hanif1, Shehzada Saif ul Malook1 and Wasimullah2*
1Management Sciences Department, Air University, Islamabad, Pakistan. 2Learning Resource Centre, National Bank of Pakistan, Islamabad, Pakistan.
Email: [email protected]

  •  Accepted: 21 November 2011
  •  Published: 29 February 2012

Abstract

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.

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This article is published under the terms of the Creative Commons Attribution License 4.0

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