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Size, Value and Momentum in Frontier Markets: Testing for Fama-French-Carhart Factors and Market Efficiency in Frontier Markets
2019 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

As more and more investors look to diversify their portfolios further, their attentions have moved past emerging markets in recent years, towards the so-called frontier markets. Frontier markets are less developed and liquid than emerging markets but offer tremendous opportunities for investors willing to allocate capital into them. This thesis will look into the applicability of global, as well as Frontier Fama-French-Carhart four-factor models within these markets and what the consequences are in terms of the efficient market hypothesis. The factor models will try to explain returns based on Size, Value and Momentum, as the literature has shown that asset pricing models tend to have difficulties explaining these strategies. Our findings indicate that Global Fama-French factors do partially explain long-only returns, yet Frontier Fama-French-Carhart factors appear more suitable. However, the results indicate that there is a factor missing in Frontier Fama-French-Carhart factors, which could explain the excess returns. Moreover, as we did not find statistically significant and positive intercepts for all applied Momentum strategies against the Frontier and Global Fama-French-Carhart factors (not even in the robustness test), we cannot reject the weak efficient market hypothesis. However, dollar-neutral Size and Value strategies (also the combined portfolio with dollar-neutral Momentum) seem to consistently outperform Frontier and Global factors.

Place, publisher, year, edition, pages
2019.
Keywords [en]
Asset Pricing, Fama-French Four Factor, Frontier Markets, Size, Value, Momentum
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hj:diva-45172ISRN: JU-IHH-FÖA-2-20190928OAI: oai:DiVA.org:hj-45172DiVA, id: diva2:1331960
Subject / course
JIBS, Business Administration
Supervisors
Examiners
Available from: 2019-06-27 Created: 2019-06-27 Last updated: 2019-06-27Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf