An empirical
test of Fama-French three factors model in China stock market
School
of Management Fudan University Shidian Yu Zhifeng Zeng
Abstract :
In this paper
we mimicking reasonable proxies for the FF factors and employ a GMM testing
procedure in
which the main focus of the tests is to assess the overriding validity of the
restriction
s placed on
the empirical model framework of FF model. First, the mimicking portfolios do
represent
sources of exposure across a sample of industries portfolios. Second, based on
the GMM
test performed
on our sample, the evident is strongly support the three-factor Fama-French model.
Our main
finding is the size risk premium that in China stock market is very
significantly and
book-to-market
risk premium also is significantly but not as strong as size. This is consistent
with
many evidence
of Fama-French
examination of other country.
Keywords:
Asset pricing;
Fama-French
factors; GMM estimation.
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