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Validity Of Fama And French Model On Rts Index

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  • S. Ozornov

    (Financial University)

Abstract

The tools for estimating expected returns have advanced from mean-variance relationship to CAPM, a one-factor model that set the background for a more developed multifactor Fama-French model. Different developed and emerging markets were considered while testing the CAPM and the three-factor model. However,Russian capital market was lacking the Fama-French model test. This is a market with unique conditions of the transitional economy. The testing of the validity of the model on RTS was chosen as an objective for this research. With the dataset of 50 blue-chip Russian companies the results revealed that Fama-French outperforms CAPMon RTS index. Despite that, there are several limitations to the model due to the market inefficiency in Russia.This fact leaves arbitrage opportunities for investors. Финансовые инструменты, позволяющие определить ожидаемые доходы, развились от простой взаимосвязи риска и доходности до CAPM и далее до трехфакторной модели. В процессе проверки моделей CAPM и Fama-French были изучены различные развитые и развивающие рынки, кроме российского рынка. Данный рынок находится в переходном состоянии, и тестирование модели Fama-French на индексе РТС было выбрано для исследования. По данным топ-50 компаний, в результате исследования было показано превосходство трехфакторной модели над CAPM на индексе РТС. Несмотря на это, существует несколько ограничений в модели из-за неэффективности российского рынка. Данный факт позволяет инвесторам использовать арбитражные возможности.

Suggested Citation

  • S. Ozornov, 2015. "Validity Of Fama And French Model On Rts Index," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 3(4), pages 22-43.
    • Handle: RePEc:scn:00rbes:y:2015:i:4:p:22-43
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    References listed on IDEAS

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