Cross-sectional test of the Fama-French three-factor model: Evidence from Bangladesh stock market

Md Zobaer Hasan, Anton Abdulbasah Kamil

Research output: Chapter in Book/Report/Conference proceedingConference PaperResearchpeer-review

Abstract

Stock market is an important part of a country's economy. It supports the country's economic development and progress by encouraging the efficiency and profitability of firms. This research was designed to examine the risk-return association of companies in the Dhaka Stock Exchange (DSE) market of Bangladesh by using the Fama-French three-factor model structure. The model is based on three factors, which are stock beta, SMB (difference in returns of the portfolio with small market capitalisation minus that with big market capitalisation) and HML (difference in returns of the portfolio with high book-to-market ratio minus that with low book-to-market ratio). This study focused on the DSE market as it is one of the frontier emerging stock markets of South Asia. For this study, monthly stock returns from 71 non-financial companies were used for the period of January 2002 to December 2011. DSI Index was used as a proxy for the market portfolio and Bangladesh government 3-Month T-bill rate was used as the proxy for the risk-free asset. It was found that large capital stocks outperform small capital stocks and stocks with lower book-to-market ratios outperform stocks with higher book-to-market ratios in the context of Bangladesh stock market.

Original languageEnglish
Title of host publicationStatistics and Operational Research International Conference, SORIC 2013
EditorsLai Soon Lee, Mahendran Shitan, Zainidin K. Eshkuvatov
PublisherAmerican Institute of Physics
Pages81-91
Number of pages11
ISBN (Electronic)9780735412491
DOIs
Publication statusPublished - 2014
Externally publishedYes
EventStatistics and Operational Research International Conference 2013 - Sarawak, Malaysia
Duration: 3 Dec 20135 Dec 2013

Publication series

NameAIP Conference Proceedings
Volume1613
ISSN (Print)0094-243X
ISSN (Electronic)1551-7616

Conference

ConferenceStatistics and Operational Research International Conference 2013
Abbreviated titleSORIC 2013
CountryMalaysia
CitySarawak
Period3/12/135/12/13

Keywords

  • Beta
  • Book-to-Market Ratio
  • Dhaka Stock Exchange
  • Market Capitalisation

Cite this