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Business Review

Abstract

This study investigates the performance of CAPM, three-factor and five-factor asset pricing models on the Pakistan Stock Exchange using monthly data of 896 companies from November 2000 to December 2016. The results from the time-series approach show that the three-factor model performs relatively better than the CAPM and the five-factor model, whereas the cross-sectional approach establishes the superiority of the five-factor model. It can thus be concluded that it is important to incorporate factors, such as size, value, profitability and investment when predicting returns on securities in the Pakistan Stock Exchange.

Keywords

CAPM, Three-factor model, Five-factor model, Portfolio, Pakistan Stock Exchange

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

Published Online

December 14, 2020

Included in

Finance Commons

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