Daily Academic Alpha: Factors Abroad

Daily Academic Alpha: Factors Abroad

March 13, 2015 Research Insights
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(Last Updated On: January 18, 2017)

Interaction of Size and Momentum Effects in Jordan Firms: 2005-2014

This study sought to disentangle the effects of size and whether there are size and momentum effects on Jordan firm returns. Initial findings showed that size effect has important role in explaining returns. For momentum effect, while in general there is no momentum effect in Jordan firm market, the study results founds that there is a strong evidence of momentum for the large-sized portfolios at Jordan firm returns. There is interaction between size and momentum. Two key findings emerge. First, there is a strong evidence for size effect. Second, the momentum premium is only evident for the large-sized portfolios.


The paper examines the relations between selected company characteristics and common stock returns. In the paper, we concentrate on four well-recognized fundamental factors determining stock returns: momentum, value, size and liquidity. First, we review the existing literature in the field. Second, we investigate the relationship between fundamental factors and stock returns on the Polish market. Our computations are based on all companies on the Warsaw Stock Exchange listed in the period 2000-12. Our research provides fresh out-of-sample evidence for momentum, value, size and liquidity premium from the Polish market.

The Application of Three-Factor Pricing Model in LQ45 Index

The Capital Asset Pricing Model has been widely used in many countries and modified to several models such as to Three-Factor Pricing Model and Four-Factor Pricing Model. The objective of this research is to compare the Three-Factor Pricing Model and Four-Factor Pricing Model for stocks in Indonesia Stock Exchange LQ45 index. Financial data for the period 2006 to 2011 were obtained from the Indonesia Stock Exchange’s website. Fama-French methodology was used to construct equations Three-Factor Pricing Model, while to build a Four-Factor Pricing Model the methodology used was developed by Carhart. The result of using quantitative method and multiple-regression indicates that Four-Factor Pricing Model is fitter than Three-Factor Pricing Model for Indonesia Stock Exchange LQ45 index in that period.




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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.