dc.description.abstract | In the past, there was still no consensus on the empirical research of factor models in the Taiwan market. Due to the characteristics of the Taiwan market and the difference in investor structure from that of the United States, the factors and models that explain stock returns in the United States may not be applicable in the Taiwan market.
This study uses cross-sectional analysis to test the explanatory power of Fama-French′s five-factor model in the Taiwan market. It is found that most of the profit factors and investment factors in the five-factor model are not significant, and some of the intercept terms are significantly different from zero, so In this study, the five-factor model is added to the kinetic energy factor, the lack of liquidity factor, and the investor’s sentiment factor. It is hoped that by considering different variables, the model′s explanatory power will be improved and a model suitable for the Taiwan market will be found.
The empirical results found that the kinetic energy factor and the lack of liquidity factor in the Taiwan stock market are not very explanatory, while the investor sentiment factor has a part of the explanatory power for the stock returns in the Taiwan market.
And since most of the research on factor models in Taiwan in the past was the result of discussing the average rate of return, this study further tested the self-constructed eight-factor model with component regression, and explored the changes in factor coefficients and model explanatory power under different quantiles. It is found that the eight-factor model has the highest explanatory power at the 10th percentile and the explanatory power tends to decrease as the percentile increases, which is consistent with the research results of the US market. | en_US |