Fama, French och Carhart - kan någon ge oss en förklaring?

Sammanfattning: Purpose: The purpose of the thesis is to examine if two investment strategies, Magic Formula and Momentum strategy, are capable of generating an abnormal return on the european stock market according to four asset pricing models during the time period between July 2000 and July 2018. A secondary purpose is to investigate the investment strategies’ performance in relation to the market portfolio. Methodology: The authors conducted the thesis using a quantitative method with hypothesis testing through regression analysis. Theoretical perspective: The thesis is based on a critical approach towards The Efficient Market Hypothesis (EMH). Magic Formula and Momentum strategy which both have the purpose of generating abnormal returns are discussed in order to test EMH. Furthermore, the authors discuss the asset pricing models from Sharpe & Lintner, Fama & French and Carhart, that are used to estimate the expected return of stock portfolios. Empirical foundation: The empirical data of the thesis consists of the monthly return of 434 companies selected through the criterias of Magic Formula, and 1241 companies selected through the criterias of the Momentum strategy. The data has been collected from Bloomberg Terminal and Kenneth French’s database. Conclusions: The results show that Magic Formula is able to produce a statistically significant intercept (