Asset pricing: analysis of multi-factor models using Fama and French factors
Goicoechea Piélago, Maider
The present paper considers the five factors proposed by Fama and French (1992, 2015), plus the factor proposed by Carhartt (1997): market premium, size, book-to-market ratio, profitabil- ity, investment, and momentum. The aim of this thesis is to analyze the behavior of these factors and test the ability to explain cross-sectional variations in the data. Other authors have done the similar analysis with different databases, such as, Asgharian & Hansson (2002) with Swedish data, and Beltratti & Di Tria (2002) with Italian market data, both with the same results as this paper. The data used for this purpose is monthly European market from July 1990 to March 2021: twenty-five portfolios of European returns formed on size and book-to-market value and European based six returns of factors. Using Fama & MacBeth (1973) methodology and OLS regression, results show rarely significant and different from zero coefficients in the cross-sec- tional analysis for the six factors, even if sporadically some coefficients are positive and different from zero.