Abstract
Fama and French (2015) recently proposed a five-factor model which adds investment and profitability terms to their seminal three-factor model. Motivated by the accounting-based nature of the new factors, we conduct a comprehensive test of variants of the models in Indonesia – a country which previous researchers have characterized by an idiosyncratic financial reporting environment and low earnings quality. We show that the traditional three-factor model works poorly in Indonesia. However, despite large and significant profitability and investment premiums, the five-factor model offers at best only a trivial improvement to the description of average returns.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
