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Financial Analytics: Science and Experience
 

Efficiency of multi-factor models for evaluating the yield on financial assets in the Russian stock market

Vol. 13, Iss. 2, JUNE 2020

Received: 28 January 2020

Received in revised form: 10 February 2020

Accepted: 23 March 2020

Available online: 28 May 2020

Subject Heading: ASSESSMENT AND APPRAISAL ACTIVITIES

JEL Classification: G12, G17, G32

Pages: 147–166

https://doi.org/10.24891/fa.13.2.147

Trachenko M.B. State University of Management (SUM), Moscow, Russian Federation
mb_trachenko@guu.ru

https://orcid.org/0000-0002-2923-4316

Volodina A.O. State University of Management (SUM), Moscow, Russian Federation
ao_volodina@guu.ru

https://orcid.org/0000-0003-3466-8212

Subject. The article addresses the use of multi-factor models, like CAPM model, Fama-French model, Carhart model, for evaluating profitability of financial assets in the Russian economy.
Objectives. The purpose is to show the expediency of using multi-factor models for evaluating the profitability of financial assets of Russian companies; identify the most effective models for companies operating in various sectors of economy; make evaluation over different periods of time (two years, one year, half year, quarter, and month).
Methods. The study draws on the CAPM model, Fama-French model and Carhart model, and general scientific and statistical methods applied for the analysis of economic processes.
Results. We evaluated expected return on financial assets of 41 companies in 5 different areas, i.e. the chemical industry (9 companies), oil and gas sector (9 companies), telecommunications (7 companies), transport (7 companies), and electric energy sector (9 companies) for different time periods. The paper includes estimations of expected yield in portfolios of financial assets by industry and time interval, assesses the effectiveness of multi-factor models, if they are used in the Russian economy, and identifies models, which are most suitable for predicting profitability of financial assets in the context of industry and time period.
Conclusions. The Carhart model is the most preferable for evaluation of expected return on financial assets. It is impractical to use multi-factor models for companies operating in the transport and telecommunications industry. The considered models enable to make more accurate short-term forecasts.

Keywords: financial asset valuation, Capital Asset Pricing Model, Fama- French model, Carhart model, expected return

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