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The Fama-French five-factor model and emerging market equity returns

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  • Mosoeu, Selebogo
  • Kodongo, Odongo

Abstract

We test the Fama-French five-factor asset-pricing model on average stock returns for selected emerging and developed equity markets. We deploy the generalized method of moments (GMM) regression on 313 weekly data observations for the period, January 2010 through December 2015. We find that the profitability factor is the most useful for explaining the cross-section of emerging markets equity returns. The five-factor model performs dismally on country-specific portfolios and on geographically diversified portfolios using the Gibbons-Ross-Shanken (GRS) tests. Our results are broadly consistent with those of studies that use Australian, Chinese and South African data but contrary to studies examining American and Japanese data.

Suggested Citation

  • Mosoeu, Selebogo & Kodongo, Odongo, 2022. "The Fama-French five-factor model and emerging market equity returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 55-76.
    • Handle: RePEc:eee:quaeco:v:85:y:2022:i:c:p:55-76
    DOI: 10.1016/j.qref.2020.10.023
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    More about this item

    Keywords

    Emerging equity markets; Fama-French factors; Generalized method of moments;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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