IDEAS home Printed from https://ideas.repec.org/a/ids/afasfa/v7y2017i1p1-15.html
   My bibliography  Save this article

The four-factor model and stock returns: evidence from Sri Lanka

Author

Listed:
  • Amal Peter Abeysekera
  • Pulukkuttige Don Nimal

Abstract

There have been numerous studies that have attempted to explain the cross-sectional variation in average returns in developed and emerging markets. However, there is a dearth in the published evidence of research that has looked at frontier markets regarding this aspect. Sri Lanka is considered to be a frontier market and hence the objective of this study is to test the ability of the Carhart four-factor model to explain the variation in the cross-section of average stock returns in the Colombo Stock Exchange (CSE) and to evaluate it in comparison to the capital asset pricing model (CAPM) and the Fama and French three-factor model. The study finds that the four-factor model, incorporating the market factor, size factor, value factor and momentum factor, provides a satisfactory explanation of the variation in the cross-section of average stock returns in the CSE. Further, it is found that the four-factor model performs better than the CAPM and the three-factor model.

Suggested Citation

  • Amal Peter Abeysekera & Pulukkuttige Don Nimal, 2017. "The four-factor model and stock returns: evidence from Sri Lanka," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 7(1), pages 1-15.
    • Handle: RePEc:ids:afasfa:v:7:y:2017:i:1:p:1-15
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=82924
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:afasfa:v:7:y:2017:i:1:p:1-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=214 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.