Systematic risk determinants of stock returns after financial crisis: Evidence from United Kingdom

Vu Quang Trinh, Dipesh Karki, Binam Ghimire

Research output: Contribution to journalArticle

Abstract

This paper provides an empirical analysis of FTSE100 stock returns during the period of 2009 to 2013 with an aim to assess the relevancy of Fama-French three factor model post financial crisis of 2008. FTSE100 index was chosen in particular as it is benchmark of the prosperity among UK stocks. Assortment of six portfolios S/L, S/M, S/H, B/L, B/M and B/H based on firm‟s size and book-to-market ratio was constructed as per guidelines of Fama- French model. The ordinary least square estimation showed consistently positive and significant in all observed portfolios.However the results indicated that excess market return is the dominant variable among three risk factors meanwhile size factor (SMB) was significant while explaining only small-scale portfolios returns but had no effect on the average returns of large-scale portfolio. Likewise value factor (HML) appeared to be somewhat effective only in case of high book-to-market stock portfolios. Thus the impact of book-to-market value on the average excess returns of these observed portfolios behave in an un-systematic manner.
LanguageEnglish
Pages1-28
Number of pages28
JournalJournal of Finance and Investment Analysis
Volume5
Issue number1
Early online date1 Mar 2016
Publication statusE-pub ahead of print - 1 Mar 2016
Externally publishedYes

Fingerprint

Book-to-market
Stock returns
Systematic risk
Factors
Financial crisis
Market value
Risk factors
Empirical analysis
Ordinary least squares
Assortment
Fama-French model
Excess returns
Benchmark
Market returns
Fama-French three-factor model
Prosperity
Book-to-market ratio

Cite this

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Systematic risk determinants of stock returns after financial crisis : Evidence from United Kingdom. / Trinh, Vu Quang; Karki, Dipesh ; Ghimire, Binam.

In: Journal of Finance and Investment Analysis, Vol. 5, No. 1, 01.03.2016, p. 1-28.

Research output: Contribution to journalArticle

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