Revisiting The Fama And French Three-Factor Model For The Case Of Vietnam
VÕ THỊ QUÝ & NGUYỄN VĂN SĨ
This paper is to investigate the fitness of the Fama and French three-factor model in the HCMC Stock Exchange (HOSE) over the period 2007-2009. The results have proven that this model is more superior to the capital asset pricing model (CAPM) when explaining changes in the total risk premium or the return on equity in HOSE; yet it is not to veto that CAPM is not an effective tool to analyze the total risk premium or the return on equity, which is not only affected objectively by the market forces but also subjectively by features of listed companies such as their size and value (the book-to-market ratio [BE/ME]). The results also figure out that the market factor out of three factors produces the biggest effect on the total risk premium of a stock. In other words, although investors in HOSE have attended to features of listed companies, it is kind of humble. Their investing decisions are mainly based on ups and downs of the market.