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The Fama-French Five-Factor Model Plus Momentum: Evidence for the German Market

Author

Listed:
  • Philipp Dirkx

    (Zeppelin University)

  • Franziska J. Peter

    (Zeppelin University)

Abstract

We implement the Fama-French five-factor model and enhance it with a momentum factor for the German market using recent monthly data from 2002 to 2019. We construct the factors associated with the market, size, value, profitability, investment, and momentum for the CDAX constituents and examine to what extent this six-factor model captures the return premia in the German market. Our preliminary analysis does not document any significant evidence on the profitability or investment premium. The results on the six-factor model compared with the three-factor model reveal that the additional factors do not add significant explanatory power to the analysis. We conclude that the relevance of the profitability and investment factors within the context of international asset pricing studies cannot be transferred to the country- specific case of the German market.

Suggested Citation

  • Philipp Dirkx & Franziska J. Peter, 2020. "The Fama-French Five-Factor Model Plus Momentum: Evidence for the German Market," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(4), pages 661-684, October.
    • Handle: RePEc:spr:schmbr:v:72:y:2020:i:4:d:10.1007_s41464-020-00105-y
    DOI: 10.1007/s41464-020-00105-y
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    2. Michal Gnap, 2022. "Problems Related to the Capital Assets Pricing Model on the Warsaw Stock Exchange: Applications of the 5-Factor Fama and French Model," Research Reports, University of Warsaw, Faculty of Management, vol. 1(36), pages 4-14.
    3. Virla, Leonardo Quero, 2021. "An empirical characterization of volatility dynamics in the DAX," IPE Working Papers 167/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Artur A. Trzebiński, 2022. "Assessing the performance of mutual funds with multifactor asset pricing models," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 79-106.
    5. Andreas Oehler & Julian Schneider, 2023. "Social trading: do signal providers trigger gambling?," Review of Managerial Science, Springer, vol. 17(4), pages 1269-1331, May.

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