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Korean Journal of Financial Studies 2015;44(5):855-885.
Published online December 31, 2015.
Market Anomalies and Multifactor Models:Comparison between the FF Model and the CNZ Model
Minkyu Lee, Ki Yool Ohk
시장이상현상과 다요인모형
이민규, 옥기율
Abstract
In this paper, a comprehensive review is made on the currently known anomalies seen in the Korean stock market, and both the FF model (Fama and French, 1993) and the CNZ model (Chen et al., 2011) will be examined to determine which multifactor model is more suitable to give account for the anomalies. Our major empirical findings are as follows. First, the factors obtained via equally-weighted return provided more convincing explanations than value-weighted return for both the FF and CNZ models. Second, applying equally-weighted return made anomalies very visible while value-weighted return did not. Therefore, small firm effect seems to be responsible for the majority of the anomalies. Third, regardless of return calculation methods for test portfolios was used when FF and CNZ models were probed if they could give account for anomalies, CNZ model performed better overall than FF model. This result implies that CNZ model can be an effective alternative to FF model in activities such as estimating cost of capital for firms, measuring abnormal returns, and evaluating the performance of managed portfolios, and so on.
Key Words: 다요인모형,시장이상현상,CNZ 모형,CNZ Model,FF 모형,FF Model,GRS 검정,GRS F-test,Market Anomaly,Multifactor Model
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