Famas och Frenchs två faktorer: proxyvariabler för konkursrisk?

Sammanfattning: The aim of this study is to examine whether the two factors SMB and HML in the Fama-French Three Factor Model proxy for default risk. The study is based on companies noted on the Stockholm Stock Exchange between 2003 and 2008. These companies are used to create the factors SMB and HML, as well as a default risk factor we call RMS. In a first set of regressions, we examine the explanatory power of the original Fama-French model on a set of portfolios consisting of Swedish companies of different size and book-to-market ratio. The default risk factor RMS is then added to the original Fama-French model. If SMB and HML do proxy for default risk, their explanatory power should be heavily reduced once RMS is included, but this does not happen, according to our results. We conclude that our study does not provide any evidence that supports the hypothesis that SMB and HML proxy for default risk.