THE ADDITION OF THE MOMENT RISK FACTOR FOR THREE FACTORS ASSET PRICING MODEL, DEVELOPED BY FAMA & FRENCH, APPLIED TO THE BRAZILIAN STOCK MARKET

  • Adriano Mussa Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo
  • Rubens Famá Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo
  • José Odálio dos Santos Fundação Getúlio Vargas - FGV/SP
Keywords: CAPM, APT, Return, Risk, Beta.

Abstract

The objective of this article is to investigate the validity of the “four factors assets pricing model ”in theBrazilian stock market. This model is defined by the addition of the risk moment factor to the famous threefactors developed by Fama and French. Therefore, the four factors are: the market, as indicated by CapitalAsset Pricing Model (CAPM); the size of the enterprise, defined by the value of its net equity; the Book-toMarket rate (defined by the relation between the book value and market value); and the Moment, that is defined by the stocks valorization within a certain period of time. During this investigation it has utilized thesame methodology adopted by Fama and French (1993). Such survey focused on the shares traded throughthe Sao Paulo Stock Exchange (BOVESPA) between 1995 and 2006. The signification of each factor wastested using to statistic T of Student. The model e ectiveness was tested through coefficients of determinationR2 analysis of regressions timing. The research results proof that this model is applicable to the BrazilianStock Market, being superior to the Three Factors Model, and also to CAPM, while explaining the gains ofthe sampled shares. The relevance of each factor of risk varied in accordance with the characteristics ofeach portfolio.

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Author Biographies

Adriano Mussa, Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo

Doutorando em Administração (Finanças) pela Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo

Mestre em Administração (Finanças) pela PUC/SP

Professor da FIA, Saint Paul e Insper

Rubens Famá, Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo

Doutor em Administração (Finanças) pela Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo

Professor Titular do Departamento de Administração da PUC/SP

José Odálio dos Santos, Fundação Getúlio Vargas - FGV/SP

Doutor em Administração (Finanças) pela Fundação Getúlio Vargas - FGV/SP

Professor do Departamento de Administração da PUC/SP

How to Cite
Mussa, A., Famá, R., & Santos, J. (1). THE ADDITION OF THE MOMENT RISK FACTOR FOR THREE FACTORS ASSET PRICING MODEL, DEVELOPED BY FAMA & FRENCH, APPLIED TO THE BRAZILIAN STOCK MARKET. REGE Revista De Gestão, 19(3). https://doi.org/10.5700/issn.2177-8736.rege.2012.49925
Section
Finanças