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Scrutinizing Portfolio Strategies And Asset Pricing Models: The French Case

Author

Listed:
  • Aya Nasreddine

    (CEROS - Centre d'Etudes et de Recherches sur les Organisations et la Stratégie - UPN - Université Paris Nanterre)

  • Souad Lajili Jarjir

    (IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

Abstract

On the basis of 25 size/book to market and 25 size/momentum portfolios and over the 1981-2013 period, this study gives robust results about the characteristics of French stock market returns with different asset pricing models (CAPM, Fama and French (1993) threefactor and Carhart (1997) four-factor models). The four-factor model accounts better for common variation in stock returns, but it adds little compared to the three-factor one. Moreover, size, value and momentum effects are more significant when stock markets are febrile. Furthermore, except for loser portfolios, asset pricing models are more relevant for big rather than small capitalizations. Using the Gibbons, Ross and Shanken (1989) test, market, size, value and momentum factors explain stock returns better than one and three-factor models. Except the four factor model, we reject all other tested asset pricing models. A better proxy for the market portfolio is the value-weighted portfolio of all stocks.

Suggested Citation

  • Aya Nasreddine & Souad Lajili Jarjir, 2017. "Scrutinizing Portfolio Strategies And Asset Pricing Models: The French Case," Post-Print hal-01527875, HAL.
    • Handle: RePEc:hal:journl:hal-01527875
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    Cited by:

    1. Cristina Raluca Gh. Popescu & Gheorghe N. Popescu, 2019. "An Exploratory Study Based on a Questionnaire Concerning Green and Sustainable Finance, Corporate Social Responsibility, and Performance: Evidence from the Romanian Business Environment," JRFM, MDPI, vol. 12(4), pages 1-79, October.
    2. Marc Desban & Souad Lajili Jarjir, 2018. "Corporate ownership structure, market anomalies and asset pricing," Journal of Asset Management, Palgrave Macmillan, vol. 19(5), pages 316-340, September.

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