How do size and value factors affect asset pricing models?
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Size and value factors have a significant impact on asset pricing models. The Fama and French three-factor model includes size and value risk as common risk factors for measuring expected stock returns in both nonfinancial and financial firms . Empirical tests suggest that size and value risk premia exist in both types of firms, although they are less explicable in financial firms. Additionally, the Fama and French five-factor model incorporates size and value factors along with profitability and investment factors, which exhibit higher explanatory power compared to other factors such as default risk and liquidity . These findings highlight the importance of considering size and value factors in asset pricing models to accurately explain the cross-section of expected stock returns.
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| The paper mentions that the size factor has an effect on asset pricing models in the Shanghai and China stock markets. However, the paper only mentions that the value effect is found only in the Shanghai stock market. It does not provide further details on how the value factor affects asset pricing models. | |
| The paper states that size and value factors have an impact on asset pricing models, as the equal-weighted portfolio has higher exposure to these factors. | |
| The paper states that the classic market anomalies, such as the size effect and the value effect, have been attenuated in recent years, leading to an increase in the explanatory power of asset pricing models, including the CAPM. | |
| The paper states that size and value factors are included in the asset pricing model proposed by Fama and French (2016b). These factors, along with market premium, profitability, momentum, liquidity, and default risk, contribute to the model's explanatory power. | |
28 Citations | The paper does not directly address how size and value factors affect asset pricing models. |
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