Estimation And Analysis Of The Required Rate Of Return According To The Five-Factor Model Fama & French In The Iraqi Stock Exchange For The Period 2005-2021

Abduljabar, Zahraa A. M; AL. Iraqi, Bashar A.

doi:10.33899/tanra.2022.135484.1228

	Estimation And Analysis Of The Required Rate Of Return According To The Five-Factor Model Fama & French In The Iraqi Stock Exchange For The Period 2005-2021
TANMIYAT AL-RAFIDAIN
Volume 42, Issue 138, 2023, Pages 24-47 PDF (871.23 K)
Document Type: Research Paper
DOI: 10.33899/tanra.2022.135484.1228
Authors
zahraa A. M abduljabar^* ; Bashar A. AL. Iraqi
Department of Finance and Banking Sciences, College of Administration and Economics, University of Mosul, Mosul, Iraq
Abstract
The research aims to provide a comprehensive and clear picture of the theoretical and philosophical foundations of the Fama & French 5F model, through which the factors and variables that can exert an effective influence in estimating and analyzing the required rate of return and the mechanism of their interaction are diagnosed, followed by foreseeing an objective empirical model capable of determining the nature، value and direction of this effect in a sample of companies listed on the Iraq Stock Exchange for the period (2005-2021) and according to the Panal Data, quarterly, By adopting the methodology of what is known as the Autoregressive Distributed Lag (ARDL) model, which explains the nature of the effect in the short-term (error correction model) as well as the long-term, in addition to what it includes from standard diagnostic tests such as the autocorrelation test for residuals, and the test for the instability of variance , as well as conducting the model stability test (structural stability of the estimated parameters) and the cumulative sum of residuals test (CUSUM). The research reached the possibility of the Fama & French five-factor model by adding risk factors to the traditional model (CAPM) for pricing capital assets represented by (beta factor, volume factor, book value factor to market value، profitability factor and investment factor) to explain the changes in the required rate of return, where the size factor, the book value factor to the market value، the profitability factor exercised a positive impact on the required rate of return in the study sample companies, while the investment factor exerted a negative impact on them.
Keywords
Fama & French Five-Factor Model; Capital Asset Pricing; Required Rate Of Return

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