Common risk factors in the returns on stocks : empirical evidence from Singapore.

The purpose of this paper is to establish an asset pricing model that can explain the common variation in stock return. Five common risk factors are identified, three are stock-market factors (an overall market factor and factor related to firm size and book to market equity) and two are bond-market...

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Main Authors: Kurniawan, Morina., Ng, Chin Thin.
Other Authors: Low Chan Kee
Format: Final Year Project
Language:English
Published: 2011
Subjects:
Online Access:http://hdl.handle.net/10356/44445
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-444452019-12-10T12:42:49Z Common risk factors in the returns on stocks : empirical evidence from Singapore. Kurniawan, Morina. Ng, Chin Thin. Low Chan Kee School of Humanities and Social Sciences DRNTU::Social sciences::Economic theory The purpose of this paper is to establish an asset pricing model that can explain the common variation in stock return. Five common risk factors are identified, three are stock-market factors (an overall market factor and factor related to firm size and book to market equity) and two are bond-market factors (term and default risk). This paper uses time series regression approach of Black, Jensen and Scholes (1972) to study the average returns on 453 randomly selected stocks listed in Singapore stock exchange (SGX) from the period July 2007 until June 2009. Regression of excess stock returns on the term and default factors, captures very little variation in the returns of stocks. Regression of excess stock returns on the Size and Book-to-Market Equity factors is inadequate in explaining variations in the returns of the stock market. Regression of excess stock returns on the Market Excess Return, Size and Book-to-Market Equity factors produces the strongest R2 among previous two models. Finally, attributed to the insignificance of term, default and size factors, we based our final regression model on two factors only, excess market return and book to market equity, and conclude that these are the only two significant risk factors that contributed to the variation in excess stock market returns between the year 2007 to 2009. Bachelor of Arts 2011-06-01T08:22:26Z 2011-06-01T08:22:26Z 2011 2011 Final Year Project (FYP) http://hdl.handle.net/10356/44445 en Nanyang Technological University 42 p. application/pdf
institution Nanyang Technological University
building NTU Library
country Singapore
collection DR-NTU
language English
topic DRNTU::Social sciences::Economic theory
spellingShingle DRNTU::Social sciences::Economic theory
Kurniawan, Morina.
Ng, Chin Thin.
Common risk factors in the returns on stocks : empirical evidence from Singapore.
description The purpose of this paper is to establish an asset pricing model that can explain the common variation in stock return. Five common risk factors are identified, three are stock-market factors (an overall market factor and factor related to firm size and book to market equity) and two are bond-market factors (term and default risk). This paper uses time series regression approach of Black, Jensen and Scholes (1972) to study the average returns on 453 randomly selected stocks listed in Singapore stock exchange (SGX) from the period July 2007 until June 2009. Regression of excess stock returns on the term and default factors, captures very little variation in the returns of stocks. Regression of excess stock returns on the Size and Book-to-Market Equity factors is inadequate in explaining variations in the returns of the stock market. Regression of excess stock returns on the Market Excess Return, Size and Book-to-Market Equity factors produces the strongest R2 among previous two models. Finally, attributed to the insignificance of term, default and size factors, we based our final regression model on two factors only, excess market return and book to market equity, and conclude that these are the only two significant risk factors that contributed to the variation in excess stock market returns between the year 2007 to 2009.
author2 Low Chan Kee
author_facet Low Chan Kee
Kurniawan, Morina.
Ng, Chin Thin.
format Final Year Project
author Kurniawan, Morina.
Ng, Chin Thin.
author_sort Kurniawan, Morina.
title Common risk factors in the returns on stocks : empirical evidence from Singapore.
title_short Common risk factors in the returns on stocks : empirical evidence from Singapore.
title_full Common risk factors in the returns on stocks : empirical evidence from Singapore.
title_fullStr Common risk factors in the returns on stocks : empirical evidence from Singapore.
title_full_unstemmed Common risk factors in the returns on stocks : empirical evidence from Singapore.
title_sort common risk factors in the returns on stocks : empirical evidence from singapore.
publishDate 2011
url http://hdl.handle.net/10356/44445
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