Analyzing Stock Price Volatility by Fama-French 5- Factor Asset Pricing model: Evidence from NASDAQ, NYSE & FAANG

Abstract

The purpose of this study is to empirically investigate NASDAQ, NYSE and FAANG the high performing tech stocks prices, also to detect the multiple risk factors that affect the high performing tech stock prices listed on the NASDAQ and NYSE. The study conducted by using the daily returns from 3800 firms registered on NASDAQ and 2400 New York Stock Exchange since July 2018 through February 2019 for a total number of 240 observations. In order to examine the factors, the data for selected companies was collected form the Fama-French database which they are updated since two decades. The data was analyzed by the application of Fama and French (2015) Five Factor asset pricing technique (FF5F) in order to examine (5 risk factor betas) marketplace, market capitalization, BV/MV, profitability, and investment over the multiple crisis period considering pre-crisis, crisis and post-crisis periods in order to analyze the movements of the betas. This study concluded that investment is the most critical factor among all those 5 factors which affected the excess returns to decrease during the crisis and if we compare to the growth of these tech giants considering Facebook, Apple, Amazon, Netflix and Google, these companies have invested billions of dollars into their technological advancement. The second factor which affected in the crisis the most to the excess return mostly is profitability as it is a bridge to the investment. On the other hand, the size factor was least impactful upon the big size companies but it showed a highly impactful positive effect on the small size companies which resulted in super high returns after the recovery from the crisis.