The Validity Test of q-Factor Model in Borsa Istanbul


Ozkan N.

ESKISEHIR OSMANGAZI UNIVERSITESI IIBF DERGISI-ESKISEHIR OSMANGAZI UNIVERSITY JOURNAL OF ECONOMICS AND ADMINISTRATIVE SCIENCES, vol.14, no.2, pp.441-456, 2019 (Journal Indexed in ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 14 Issue: 2
  • Publication Date: 2019
  • Doi Number: 10.17153/oguiibf.489738
  • Title of Journal : ESKISEHIR OSMANGAZI UNIVERSITESI IIBF DERGISI-ESKISEHIR OSMANGAZI UNIVERSITY JOURNAL OF ECONOMICS AND ADMINISTRATIVE SCIENCES
  • Page Numbers: pp.441-456

Abstract

Asset pricing models are the subject that has attracted much attention in finance for years. Recently Hou, Xue and Zhang (2015) developed a new asset pricing model and denominated "q-factor model". In the model, the excess returns of risk-free rate are explained by market beta, firm size, investment and profitability factors. In this study, the validity of q-factor model in Borsa Istanbul is investigated by using time series regression method. As per GRS-F test results, it is obtained that q-factor model is valid in Borsa Istanbul. The findings revealed that all four factors are priced between July 2009 and June 2016 in Borsa Istanbul and q-factor model can be used in predicting expected returns.