Energy Portfolio Returns Explanation Using Fama & French Five-Factor Model

Subject Areas : Financial engineering

Mohammad Yousefian Amiri ¹ , Babak Shirazi ² , Ali Tajdin ³ , Hossein Mohammadian Bisheh ⁴

1 - Department of Industrial Engineering, Mazandaran University of Science and Technology, Mazandaran, iran
2 - Department of Industrial Engineering, Mazandaran University of Science and Technology, Mazandaran, iran
3 - Department of Industrial Engineering, Mazandaran University of Science and Technology, Mazandaran, iran
4 - Department of Industrial Engineering, Mazandaran University of Science and Technology, Mazandaran, iran

Received: 2020-02-04 Accepted : 2020-07-20 Published : 2021-03-21

Keywords: Capital asset pricing, Energy Portfolio Returns, Fama & French Five-Factor Model, Energy Stock Exchange,

Abstract :

Investing in the Iran Energy Exchange is one of the ways to achieve returns. Among the capital asset pricing models, one of the most important new tools for risk and return determination is the Fama and French five-factor model. In this study, we examined the power of explaining the return on investment portfolio consisting of 40 companies operating in Iran Energy Bruce from 2009 to 2018 using the five-factor model of Fama and French. For this purpose, we have used F-Limer and Hausman statistical tests and multivariate regression analysis method in three-factor and five-factor models of Fama and French to explain the efficiency of energy portfolio returns. The results of this study show that by adding the two factors of profitability and investment to the three-factor model, the coefficient of determination increases from 0.85 to 0.96. Among these five factors, the value factor has the greatest impact on energy portfolio returns. Also, with the addition of market factors, the value and profitability of energy portfolio returns increased, but size and investment factors were inversely related to energy portfolio returns and reduced it.