THE FAMA-FRENCH FIVE-FACTOR ASSET PRICING MODEL: A RESEARCH ON BORSA ISTANBUL

Abstract

This study aims to test the validity of the Fama-French Five-Factor Model (FF5F) for Turkey. Within the scope of the study, throughout 468 weeks between September 2009 and August 2018, the returns over the risk-free interest rate of 18 different intersection portfolios are used based on value, profitability, and investment factors. A total of 8424 portfolios (18 portfolios x 468 weeks) are generated in the study. As a result of the analyses, it is determined that the Five-Factor Asset Pricing Model is valid for Borsa İstanbul. Subsequently, it is concluded that the Fama-French Five-Factor Model has a higher explanatory power in describing the stock returns of the portfolios formed with stocks of small-scale companies compared to the portfolios formed with stocks of large-scale companies. The findings are consistent with the literature. © 2023, Bulgarska Akademiya na Naukite. All rights reserved.