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The Time-Varying Coefficient Fama - French Five Factor Model: A Case Study in the Return of Japan Portfolios KCI 등재 SCOPUS
- 언어ENG
- URLhttps://db.koreascholar.com/Article/Detail/399971
In this paper, we have developed a Fama - French five factor model (FF5 model) from Fama & French (2015) by using concept of timevarying coefficient. For a data set, we have used monthly data form Kenneth R. French home page, it include Japan portfolios (classified by using size and book-to-market) and 5 factors from July 1990 to April 2020. The first analysis, we used Augmented Dickey-Fuller test (ADF test) for the stationary test, from the result, all Japan portfolios and 5 factors are stationary. Next analysis, we estimated a coefficient of Fama - French five factor model by using a generalized additive model with a thin-plate spline to create the time-varying coefficient Fama - French five factor model (TV-FF5 model). The benefit of this study is TV-FF5 model which can capture a different effect at different times of 5 factors but the traditional FF5 model can’t do it. From the result, we can show a time-varying coefficient in all factors and in all portfolios, for time-varying coefficients of Rm-Rf, SMB, and HML are significant for all Japan portfolios, time-varying coefficients of RMW are positively significant for SM, and SH portfolio and time-varying coefficients of CMA are significant for SM, SH, and BM portfolio.
1. Introduction
2. Statistical Theory and Literature Review
2.1. Time-Varying Coefficient with theGeneralized Additive Model
2.2. Thin Plate Regression Splines
2.3. Augmented Dickey-Fuller test
2.4. Literature Review
3. Research Methods and Materials
3.1. Scope of the Study and Data Used
3.2. Empirical Methods
4. Results and Discussion
4.1. Descriptive Analysis and Stationary Test
4.2. Time-Varying Coefficient Fama - French FiveFactor Model
5. Conclusions
References
