THE FAMA-FRENCH FIVE-FACTOR ASSET PRICING MODEL: A RESEARCH ON BORSA ISTANBUL

Altinay A. T., DOĞAN M., Ergun B. L. D., Alshiqi S.

Ikonomicheski Izsledvania, vol.32, no.4, pp.3-21, 2023 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 32 Issue: 4
  • Publication Date: 2023
  • Journal Name: Ikonomicheski Izsledvania
  • Journal Indexes: Scopus, Central & Eastern European Academic Source (CEEAS), EconLit
  • Page Numbers: pp.3-21
  • Keywords: Borsa İstanbul, CAPM, Fama-French Five Factors Model (FF5F), Stock Returns
  • Uşak University Affiliated: Yes

Abstract

This study aims to test the validity of the Fama-French Five-Factor Model (FF5F) for Turkey. Within the scope of the study, throughout 468 weeks between September 2009 and August 2018, the returns over the risk-free interest rate of 18 different intersection portfolios are used based on value, profitability, and investment factors. A total of 8424 portfolios (18 portfolios x 468 weeks) are generated in the study. As a result of the analyses, it is determined that the Five-Factor Asset Pricing Model is valid for Borsa İstanbul. Subsequently, it is concluded that the Fama-French Five-Factor Model has a higher explanatory power in describing the stock returns of the portfolios formed with stocks of small-scale companies compared to the portfolios formed with stocks of large-scale companies. The findings are consistent with the literature.