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Issue 5(1), October 2010 -- Paper Abstracts
Girard  (p. 9-22)
Cooper (p. 23-32)
Kunz-Osborne (p. 33-41)
Coulmas-Law (p.42-46)
Stasio (p. 47-56)
Albert-Valette-Florence (p.57-63)
Zhang-Rauch (p. 64-70)
Alam-Yasin (p. 71-78)
Mattare-Monahan-Shah (p. 79-94)
Nonis-Hudson-Hunt (p. 95-106) 



JOURNAL OF ACCOUNTING AND FINANCE 


Using the Industry-Based Fama-French Model to Evaluate Industry Portfolios


Author(s): Ossama Elhadary

Citation: Ossama Elhadary, (2021) "Using the Industry-Based Fama-French Model to Evaluate Industry Portfolios," Journal of Accounting and Finance, Vol. 21, Iss. 2, pp. 24-40

Article Type: Research paper

Publisher: North American Business Press

Abstract:

In this paper I create the industry-based Fama-French 3-factor model by constructing the three Fama-French factors for each industry group separately. I then use this model together with the traditional Fama-French model to evaluate the returns of 41 monthly industry portfolios and I compare the results. Three sets of stock portfolios are used in my analysis: (1)Stocks in a single industry, (2)Stocks in industries in the same industry group, (3) Stocks in a industries not in the same industry group.

 I show that the modified Fama-French model outperforms the traditional Fama-French model when assessing the performance of those industry portfolios. This is especially true for industry portfolios within small industry groups like mining where the regression R2 improved by 34.8%, 68.8%, 28% and 1052% for the underlying Mining, Coal, Oil and Gold industries. Actually in 16 out of the 18 non-manufacturing industry portfolios, R2 improved. These results imply that within each industry group asset space, the new industry-based model tends to be more efficient than the traditional Fama-French model.