Choosing Factors for the Vietnamese Stock Market

Nina Ryan, Xinfeng Ruan, Jin E. Zhang, Jing A. Zhang
2021 Journal of Risk and Financial Management  
In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model has more explanatory power than the FF three-factor model. The value factor remains important after the inclusion of profitability and investment factors. Operating profitability performs better than cash and return-on-equity (ROE) profitability as
more » ... E) profitability as a proxy for the profitability factor in FF factor modeling. The value factor and operating profitability have the biggest marginal contribution to a maximum squared Sharpe ratio for the five-factor model factors, highlighting the value factor (HML) non-redundancy in describing stock returns in Vietnam.
doi:10.3390/jrfm14030096 doaj:eb116987f0644bed80f25823c266fba5 fatcat:nkzcctvrr5hqrjb3jbd5556zpa