Asset Pricing in Malaysia: A Comparative Study of Consumption-based CAPM and Fama-French Factor Modeks

Yeerjiang Ayiduosi & Nhan Huong Nguyen

Studenteropgave: Kandidatafhandlinger

Abstrakt

This thesis is aimed to carry out a comparative study between Consumption-oriented CAPM and Fama-French factor models in the stock market of Malaysia. Specifically, factor patterns of expected returns in the Malaysian market are investigated. Eventually, we find the effects observed from the US market do not perfectly repeat with the Malaysian data; for instance, the value effect which even exhibits a totally contradictory result. Gibbons, Ross, and Shanken (1989) test and Fama-Macbeth (1973) two-pass regression are performed to compare the selected models. This study finds that FF factor models perform empirically much better than CCAPM does though all of them are not perfect in explaining Malaysia stock market. FF five-factor model does not show a significant improvement from the FF three-factor model in explaining time series excess returns while working better in crosssectional tests. For time-series testing, the redundancies of size and profitability factors appearing in the Malaysian stock market suggests an interesting point that the combination of four factors which are market, value and investment factors show a better results than both original FF three-factor and five-factor models do.

UddannelserCand.merc.fin Finance and Investments, (Kandidatuddannelse) Afsluttende afhandling
SprogEngelsk
Udgivelsesdato2020
Antal sider112