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Study of the leading European construction companies using risk factor models

Author

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  • Ana Escribano
  • Francisco Jareño
  • Jose Ángel Cano

Abstract

This paper aims to study the potential effects of changes in international risk factors on leading European construction companies' returns. The study is conducted on a sample period between January 2000 and December 2019 and applies an extension of the Fama and French five‐factor model (2015) using the quantile regression methodology. Specifically, this research extends the Fama and French (2015) factor model by adding risk factors such as nominal interest rates, momentum and momentum reversal factors (Carhart, 1997) and the traded liquidity factor (Pastor and Stambaugh, 2003). For robustness, this study splits the entire sample period into three sub‐periods: pre‐crisis, crisis, and post‐crisis. As expected, the highest R2 coefficients are observed in the extreme quantiles, that is, in the bullish and bearish market states, revealing a U‐shaped relationship in the explanatory power of this factor model.

Suggested Citation

  • Ana Escribano & Francisco Jareño & Jose Ángel Cano, 2023. "Study of the leading European construction companies using risk factor models," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3386-3402, July.
    • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:3386-3402
    DOI: 10.1002/ijfe.2598
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    References listed on IDEAS

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    Cited by:

    1. Jareño, Francisco & Yousaf, Imran, 2023. "Artificial intelligence-based tokens: Fresh evidence of connectedness with artificial intelligence-based equities," International Review of Financial Analysis, Elsevier, vol. 89(C).

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