Test of the Fama-French Five-Factor Model on the Croatian Stock Market

undergraduate thesis

• Title (croatian): Testiranje petfaktorskog Fama-French modela na hrvatskom tržištu kapitala
• Author: Sara Lončarević
• Mentor: Denis Dolinar (mentor)
• Granter: University of Zagreb; Faculty of Economics and Business; Zagreb
• Defense date and country: 2019-07-16, Croatia
• Scientific / art field, discipline and subdiscipline: SOCIAL SCIENCES; Economics; Economics of Entrepreneurship

Abstract

This paper empirically examines the applicability of the Fama-French five-factor model on the Croatian stock market. After conducting the regression analysis, it is clear that, while the Fama-French five-factor model and its risk factors capture approximately half of the variation in stock returns, there is still a lot of variation left unexplained by this model. The five-factor model appears to be only slightly more successful than the three-factor and one-factor models in capturing the variation in stock returns. While the Fama-French five-factor model can be applied to the Croatian stock market, one should note that the positive effects of upgrading from the three-factor model are marginal, if any. It is fair to assume that there are other factors to be determined that help explain the variation in stock returns on the Croatian stock market, especially when bearing in mind the unfavorable characteristics of the Croatian stock market such as persisting illiquidity, small number of stocks, numerous illiquid stocks and other, which also presented the limitations of this research.

Abstract (croatian)

Ovaj rad empirijski ispituje primjenjivost petfaktorskog Fama-French modela na hrvatskom tržištu kapitala. Nakon provedene regresijske analize, vidljivo je da, iako petfaktorski Fama-French model i faktori rizika koje uključuje objašnjavaju otprilike polovicu varijacije u povratima na dionice, još mnogo varijacije ostaje neobjašnjeno. Petfaktorski model se čini tek neznatno boljim od trifaktorskog modela u objašnjavanju varijacije u povratima na dionice. Iako se petfaktorski Fama-French model može primijeniti na hrvatsko tržište kapitala, treba imati na umu kako je pozitivan efekt nadogradnje trifaktroskog modela tek marginalan. Može se pretpostaviti da postoje drugi faktori koje se treba utvrditi, a koji pomažu objasniti varijacije u povratima na dionice na hrvatskom tržištu kapitala, pogotovo kada se imaju na umu nepovoljne karakteristike hrvatskog tržišta kapitala kao što su nelikvidnost, mali broj dionica, i druge, koje također čine ograničenje ovog rada.

• Keywords: Fama-French; petfaktorski model
• Keywords (croatian): Fama-French; petfaktorski model
• Language: english
• URN:NBN: urn:nbn:hr:148:802945
• Study programme: Title: Business Economics in English; Study programme type: university; Study level: undergraduate; Academic / professional title: sveučilišni/a prvostupnik/ prvostupnica(baccalaureus/ baccalaurea) ekonomije (sveučilišni/a prvostupnik/ prvostupnica(baccalaureus/ baccalaurea) ekonomije)
• Type of resource: Text
• File origin: Born digital
• Access conditions: Access restricted to students and staff of home institution
• Created on: 2019-07-16 10:49:24