Does the Fama-French three-factor model and Carhart four-factor model explain portfolio returns better than CAPM?: - A study performed on the Swedish stock market.
Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
This essay will compare the capital asset pricing model (CAPM), Fama and French threefactor
model and Carhart´s four-factor model, to see which of these models that can explain
portfolio excess returns best on the Swedish stock market. This thesis will tempt to validate
the three and four-factor models because of the limited amount of research done on the
Swedish stock market. The results indicate that the three-factor model improves explanatory
power for portfolio returns in comparison to the CAPM, and the four-factor model gives a
small improvement in the explanatory power compared to the three-factor model. The results
also indicate that all models have a low explanatory power when the market is volatile.
Place, publisher, year, edition, pages
2016. , 46 p.
Fama and French three-factor model, Carhart´s four-factor model, Capital Asset Pricing Model (CAPM), portfolio returns, excess returns, Swedish stock market
IdentifiersURN: urn:nbn:se:kau:diva-43784OAI: oai:DiVA.org:kau-43784DiVA: diva2:944713
Subject / course
Programme in Business and Economics
2016-06-09, Karlstad, 20:47 (Swedish)