Enhancing Performance for Fama-French Model Based on New Factors: Evidence from Multiple Industries
Year: 2024
Type: article
Abstract: As a matter of fact, in the current complex and volatile financial markets, the traditional Fama-French five-factor model shows some limitations in explaining stock returns. With this in mind, this study introduces new technical indicators (e.g., MACD, RSI, and CCI), to improve the model's performance as well as analyze the performance of the technology, energy, healthcare, financial, construction, and commodities sectors. To be specific, this research uses data collection, model construction, hypothesis testing, and statistical analysis to improve the model's explanatory power and predictive accuracy. According to the analysis, the finding proves the new factors' effectiveness and provides investors with a more accurate asset pricing tool. The research in this paper emphasizes the importance of innovation and improvement of traditional asset pricing models in the changing financial market environment. At the same time, it discusses the implications of the findings for investment strategies and market efficiency and suggests possible directions for future research.
Author: Xiaomin Guo
Institution: University of Portsmouth
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4405821239