The Fama-French Asset Pricing Models: Emerging Markets

Sammanfattning: The purpose of this thesis is to evaluate the performance of the Fama-French Three-factor, Five-factor and Six-factormodel using stock market returns from the emerging markets. The sample has been retrieved from the Kenneth R. French Data Library and contains data from 26 countries covering July 1992 to July 2021. The size and investment factor are found to be redundant. Analysis of model performance indicates that the Three-factor model producesslightly more significant results while the Five-factor model is superior in explaining and predicting the average returns. The Six-factor model manifests an explanatory power similar or greater to the Five-factor model and heavily outperforms both the Three-factor and Five-factor model in explaining the returns of portfolios sorted on momentum, however, overall the Six-factor model’s results are highly insignificant. The value and profitability factor are the primary drivers of asset returns. As a whole, the Five factor model is concluded to be a viable alternative to the Three-factor model while the Six-factor model’s results are insignificant.