Revisiting Fama-French Model through Alternative Size Measures: Evidence from South Asian Countries
FAST-National University of Computer and Emerging Sciences
The present study aims to analyze the three-factor asset-pricing model applicability in southAsian countries and addressed the methodological issues by introducing alternativemeasure of size that would increase the estimation competence of Three-Factor Asset-Pricing Model. The study includes the listed companies of major players of South Asia thatare China, India, and Pakistan. The sample consist monthly stock prices of 1148companies that cumulatively represents Pakistan, China, and India over the period from2001 to 2017. This study assumes the panel data models that includes fixed effect andrandom effect for the estimation of three Factor Model that ultimately address themethodological gap identified in a context under consideration. The results suggested thatmarket equity is a weak measure of size in emerging economies and total assets as sizemeasure is more efficient than market equity measure. It is also inferred that market equitymeasure of size is more relevant to matured markets where the investors are well informed,while total assets measure of size is more relevant to emerging economies where themarkets are not mature and investors are not well informed. This study provides the newinsight and new path by introducing alternate size measure that leads towards the furtherdevelopment in the three-factor model.
Keywords: CAPM, Fama and French Model, SMB, HML, Size Measure, Panel Data