A Comparison of New Factor Models in the Korean Stock Market. (28th October 2019)

• Record Type: Journal Article
• Authors: Kang, Hankil; Kang, Jangkoo; Kim, Wooyeon
• Is Part Of: Asia-Pacific journal of financial studies. Volume 48:Number 5(2019:Oct.)
• Page Start: 593
• Page End: 614
• Publication Date: 2019-10-28
• Subjects: Anomalies -- Asset pricing model -- Cross‐section of stock returns -- Factor model -- Time series; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12274
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: We compare the empirical performance of the Fama and French (2015) five‐factor model, the Hou et al . (2015) q‐factor model, and their variations in the Korean stock market. Among the models considered, we demonstrate that the adjusted five‐factor model, which includes the quarterly‐ rather than the yearly‐based profitability factor, best explains the size‐, value‐, investment‐, and profitability‐sorted portfolio returns. We also document supporting evidence that high‐minus‐low (HML) may not be a redundant factor in the existence of q‐factors. The adjusted five‐factor model outperforms the other factor models in digesting various anomalies in the Korean market.