A comparative study of Fama and French Three and Five Factor Models in Commercial Bank at PSX as an Emerging Capital Market


  • Muhammad Salim PAF-Karachi Institute of Economics & Technology Karachi, Pakistan
  • Muhammad Arsalan Hashmi


Commercial Bank, Pakistan Stock Exchange, Emerging Capital market


This study investigates the FF3F Model and FF5F both in public and private sector commercial banks. The study uses daily stock prices data for the period from January 2011a to 2020 retrieved from Websites of Pakistan Stock Exchange (PSX) and SCStrade.com, accounting data, from PSX and bank companies’ websites, and the risk-free rates, from the SBP website. Following Fama and French's (2015, 2017) methodology, time series GRS (Gibbson, Ross, and Shanken) regression was applied. This test was applied in two steps; firstly, OLS was run and the then Wald test was applied to test intercept terms whether they are jointly zero. The study finds that in commercial banks at PSX, both Fama and French models are rejected in PSX. When compared which model is better than the other, the result was interminable Shareholders, investors, and stakeholders desiring to invest funds in commercial banks must carry out thorough analysis in order to understand the explanation and forecasting earnings in commercial banks listed at PSX.