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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Fama French Factor Models - Empirical Justification of the two additional factors in Central Europe |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 76 |
| Date | 2021 |
| Abstract Text | By adding two factors to their profound three factor model, Eugene F. Fama and Kenneth R. French built a new five factor model with the intent to increase the explanatory power in variations of returns through the models. Ever since its introduction, the model itself was critically discussed and examined in different markets all around the globe. This thesis follows on this path and compares the two models for the German stock market over the last twenty years. In a first step, the comparison is based on linear regressions. The results indicate that the five factor model can explain the variations in return significantly better than its three factor competitor. In a second step, different forecasts are formed under the influence of the two models, on the basis of which the forecasting power of the two models is to be examined. Here too, in a direct comparison between the three and five factor models, it is concluded that the five factor model performs better. However, the results of the regressions and the forecasts should be treated with caution, as the performance of the models is only partially satisfying in absolute terms. |
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