EXAMINING ASSET PRICING MODELS IN EMERGING MARKETS: EVIDENCE FROM EGYPT

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Abstract

The study aims at executing five tantamount asset pricing models in Egypt, in particular: 1) “the CAPM”, 2) “the Fama-French three-factor model (1993)”, 3) “the Carhart model (1997)”, 4) “the four-factor model of Chan and Faff (2005)”, and 5) “the five-factor model (Liquidity and Momentum-Augmented Fama-French three factor model)”. This research effort pursues Fama-French arranging approach in view of the size and Book-to-Market proportion (B-M ratio) for 55 securities out of the most 100 stocks in the Egyptian Stock Exchange (EGX) over a five years’ time period. We utilized “the time series regression of Black, Jensen and Scholes (1972)”. The findings of the study revealed that in terms of predictability, FF three-factor model prompts a significant improvement over the CAPM, while alternate models do not demonstrate a noteworthy increment over the FF three factor model.

Keywords: Asset Pricing Models, CAPM, Fama-French Three-Factor Model, Carhart Four-Factor Model, Emerging Markets, Egypt, EGX

JEL Classification: G12, G34, M4

Received: 04.10.2018

Accepted: 19.11.2018

Published online: 28.11.2018

How to cite this paper: Shaker, M. A., & Abdeldayem, M. M. (2018). Examining asset pricing models in emerging markets: Evidence from Egypt. Corporate Ownership & Control, 16(1), 50-57. https://doi.org/10.22495/cocv16i1art6