Research Article
Comparison of CAPM and Fama-French Three Factor Model in the Auto-mobile Industry
@INPROCEEDINGS{10.4108/eai.28-10-2022.2328409, author={Zhenxu Li and Yue Ma and Zhen Wang}, title={Comparison of CAPM and Fama-French Three Factor Model in the Auto-mobile Industry}, proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China}, publisher={EAI}, proceedings_a={FFIT}, year={2023}, month={4}, keywords={capm; fama-french three-factor models; covid-19}, doi={10.4108/eai.28-10-2022.2328409} }- Zhenxu Li
Yue Ma
Zhen Wang
Year: 2023
Comparison of CAPM and Fama-French Three Factor Model in the Auto-mobile Industry
FFIT
EAI
DOI: 10.4108/eai.28-10-2022.2328409
Abstract
CAPM and the Fama French 3 Factor model (FFM3) are often used to calculate the rate of return. This paper attempts to verify that the Fama French 3 Factor model has better accuracy than the CAPM model in explaining the impact of the pandemic on American automobile companies. Specifically, the data from 5 companies are analyzed based on the CAPM model and the Fama French 3 Factor Model and calculating the coefficient value of the two models. The results show that after calculating the coefficient value of the data obtained in two ways, the coefficient value of the FFM3 is lower. Meanwhile, the prediction calculated by Fama French 3 Factor Model has a higher adjusted R square value than the prediction calculated by CAPM. It means that the FFM3 can more accurately predict the return of American automobile companies during the epidemic than the CAPM model. Therefore, this paper concludes that due to the impact and impact of COVID-19 on the market, in order to predict the return rate of automobile companies more accurately, in order to reduce or predict the impact of COVID-19, Fama French 3 Factor Mode would be a better choice than the CAPM model. These results shed light on guiding further exploration of the future investment and the prediction of the rate of return of American automobile companies during the epidemic in recent years.