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สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์
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27 January 2020
20201580083200000
No. 124

Profitability, Investment and Asset Pricing: Reconciling the Valuation and the q-Theory Approaches in the Thai Stock Market

Kanis Saengchote

Abstract

There are several ways to motivate why profitability and investment should affect stock returns. In this paper, I investigate the valuation approach of Fama and French (2015) and the q-theory approach of Hou, Xue and Zhang (2015). While the underlying theories are different, their empirical predictions are the same. Slight differences in factor construction methods afford an opportunity to combine the features of the two models. I find that reinterpreting the q factors (with more frequent rebalancing and more layers of sorting) as Fama-French valuation factors can lead to improvement in model performance. In this modified version, the market risk, size, value, profitability and investment effects are all priced in Thailand.

Kanis Saengchote
Kanis Saengchote
Chulalongkorn University
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JEL: G12
Tags: asset pricing modelfactor-mimicking portfolios
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Kanis Saengchote
Kanis Saengchote
Chulalongkorn University

Puey Ungphakorn Institute for Economic Research

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