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Choosing Factors for the Vietnamese Stock Market

Author

Listed:
  • Nina Ryan

    (Faculty of Business Evaluation, Pacific International Hotel Management School, New Plymouth 4372, New Zealand)

  • Xinfeng Ruan

    (Department of Accountancy and Finance, Otago Business School, University of Otago, Dunedin 9054, New Zealand)

  • Jin E. Zhang

    (Department of Accountancy and Finance, Otago Business School, University of Otago, Dunedin 9054, New Zealand)

  • Jing A. Zhang

    (Department of Management, Otago Business School, University of Otago, Dunedin 9054, New Zealand)

Abstract

In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.

Suggested Citation

  • Nina Ryan & Xinfeng Ruan & Jin E. Zhang & Jing A. Zhang, 2021. "Choosing Factors for the Vietnamese Stock Market," JRFM, MDPI, vol. 14(3), pages 1-23, February.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:3:p:96-:d:507713
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    References listed on IDEAS

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    Cited by:

    1. Pankaj Agrrawal, 2023. "The Gibbons, Ross, and Shanken Test for Portfolio Efficiency: A Note Based on Its Trigonometric Properties," Mathematics, MDPI, vol. 11(9), pages 1-19, May.
    2. Yu-Shang Kuo & Jen-Tsung Huang, 2022. "Factor-Based Investing in Market Cycles: Fama–French Five-Factor Model of Market Interest Rate and Market Sentiment," JRFM, MDPI, vol. 15(10), pages 1-24, October.

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