An Empirical Study and Applications of Factor Models In Taiwan Stock Market: On Industry Base

• Main Authors: Yu-Wen Chen, 陳渝雯
• Other Authors: Mei-Yuan Chen
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/70997842303672192403

碩士 === 國立中興大學 === 高階經理人碩士在職專班 === 105 === This thesis applies the three-factor model developed by Fama and French to examine the anomalies of Taiwan’s stock returns. The empirical study is implemented using monthly returns of 892 firms listed on the TSE from July 2007 to June 2016. Our empirical results confirm the effectiveness of the three-factor model of Fama-French for Taiwan’s stock market. It has be mentioned that the goodness-of-fit of the model is high to 90.35% for the portfolio with small SMB and high HML. This prospective study was performed to constructed investment portfolio of industry classification, we calculate the expected returns by the three-factor model and compare them with real returns to determine the portfolio is undervalued or overvalued. And then we make a trading strategy based on the decision. The results demonstrate the trading strategy can have excess returns. The average returns on the portfolio with small SMB and high HML is about 1.3934% which the highest but is not significant from the market returns. However, the stock return differences between the portfolios in different industries become statistically significant. The result concludes the importance of the industry factor in factor models.