Abstract:
The current study is conducted to check the predictability power of the Fama and French 3 Factor (FF3F) model in estimating the stock returns in Pakistan Stock Exchange. This research also compares the predictability power of CAPM and FF3F model. This study used the monthly data of 60 non-financial companies listed at Pakistan stock exchange for period 2017 to 2021. The study illustrates that for all portfolios, small growth stock outperforms the big value stock. The results show that cash to price ratio could also be used to measure HML and produce significant results. The findings showed that Fama and French 3 Factor model has a higher predictability power than Capital Asset Pricing model (CAPM).
