Abstract
The present study aims to analyze the three-factor asset-pricing model applicability in south Asian countries and addressed the methodological issues by introducing alternative measure of size that would increase the estimation competence of Three-Factor AssetPricing Model. The study includes the listed companies of major players of South Asia that are China, India, and Pakistan. The sample consist monthly stock prices of 1148 companies that cumulatively represents Pakistan, China, and India over the period from 2001 to 2017. This study assumes the panel data models that includes fixed effect and random effect for the estimation of three Factor Model that ultimately address the methodological gap identified in a context under consideration. The results suggested that market equity is a weak measure of size in emerging economies and total assets as size measure is more efficient than market equity measure. It is also inferred that market equity measure of size is more relevant to matured markets where the investors are well informed, while total assets measure of size is more relevant to emerging economies where the markets are not mature and investors are not well informed. This study provides the new insight and new path by introducing alternate size measure that leads towards the further development in the three-factor model.
Keyword(s)
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