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Regular version of the site

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Andrei Gusev
Testing of Multifactor Models on the Russian Stock Market after the 2014 Crisis
Economics
(Bachelor’s programme)
7
2019
The objective of the research was to test the explanatory power of CAPM, Fama and French three-factor model, Carhart four-factor model and Fama and French five-factor model on the Russian stock market after the 2014 crisis. Theoretical foundations of pricing models were described, models were tested on portfolios and stocks separately; the comparative analysis with the pre-crisis studies was obtained.

As the key result, the explanatory power of the models and their applicability to certain stock portfolios was obtained. Fama and French five-factor model shows the greatest explanatory power (29% when testing on stocks and 62% when testing on portfolios), nevertheless it slightly exceeds the explanatory power of other multifactor models. At the same time, CAPM is significantly inferior to other models, especially when testing on portfolios. All models demonstrate the best results in explaining the excess return on portfolios with large-cap companies with medium and high BE/ME ratios (72% of changes).

Also, the features of the post-crisis period were highlighted during the comparison of results with pre-crisis studies: the lower explanatory ability of market premium, size and BE / ME ratio factors; the significance of the annual momentum effect.

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