Empirical Evidence of CAPM and Fama French 3 factor model at Cement Industry of DSE

1
Avijit Mallik
Avijit Mallik
2
Mrs. Syeda Marufa Bashar
Mrs. Syeda Marufa Bashar
1 University of Dhaka.

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The study discusses empirical evidence on the explanatory power for cement manufacturing industries of the Dhaka Stock Exchange in light of Capital Asset Pricing Model (CAPM) and the Fama French three-factor model. For calculating the market return, both DSEX and DS30 indexes have been used. The study revealed that the Fama French three-factor model has better explanatory power compared to the CAPM model in the Dhaka Stock Exchange. Moreover, the size risk premium has a significant influence in explaining the expected return for cement industries of the Dhaka Stock Exchange for both DSEX and DS30. On the other hand, the value risk premium has significant power in explaining the expected return for cement industries in the Dhaka Stock Exchange.

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References

  1. F Black,M S; Jensen,M Scholes (1972). M.C. Jensen. Studies in the Theory of Capital Markets. London, Praeger Publishers, 1972, VIII p. 376 p., $ 13.50..
  2. Emon Chowdhury (2000). Functioning of Fama-French Three-Factor Model in Emerging Stock Markets: An Empirical Study on Chittagong Stock Exchange, Bangladesh.
  3. Eugene Fama,Kenneth French (1993). Common risk factors in the returns on stocks and bonds.
  4. Eugene Fama,James Macbeth (1973). Risk, Return, and Equilibrium: Empirical Tests.
  5. Dušan Isakov (1999). Is Beta Still Alive? Conclusive Evidence from the Swiss Stock Market.
  6. Jan Toporowski (2000). The End of Finance.
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  8. Robert Faff (2001). A Multivariate Test of a Dual‐Beta CAPM: Australian Evidence.
  9. Marc Reinganum (1981). Misspecification of capital asset pricing.
  10. Mahnoor Sattar (2017). CAPM Vs Fama-French Three-Factor Model: An Evaluation of Effectiveness in Explaining Excess Return in Dhaka Stock Exchange.
  11. Mohammad Sayeed,Mahfuza Khatun,Biplob Chowdhury (2014). Does Fama-French Three Factor Model Outweigh the CAPM Model? Evidence from the Dhaka Stock Exchange.
  12. W Sharpe (1964). Capital asset prices: a theory of market equilibrium under conditions of risk.

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

Avijit Mallik. 2020. \u201cEmpirical Evidence of CAPM and Fama French 3 factor model at Cement Industry of DSE\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 20 (GJMBR Volume 20 Issue C1): .

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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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February 29, 2020

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The study discusses empirical evidence on the explanatory power for cement manufacturing industries of the Dhaka Stock Exchange in light of Capital Asset Pricing Model (CAPM) and the Fama French three-factor model. For calculating the market return, both DSEX and DS30 indexes have been used. The study revealed that the Fama French three-factor model has better explanatory power compared to the CAPM model in the Dhaka Stock Exchange. Moreover, the size risk premium has a significant influence in explaining the expected return for cement industries of the Dhaka Stock Exchange for both DSEX and DS30. On the other hand, the value risk premium has significant power in explaining the expected return for cement industries in the Dhaka Stock Exchange.

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Empirical Evidence of CAPM and Fama French 3 factor model at Cement Industry of DSE

Avijit Mallik
Avijit Mallik University of Dhaka.
Mrs. Syeda Marufa Bashar
Mrs. Syeda Marufa Bashar

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