CAPM; Cross-section of stock returns; Fama and French three factors model
This paper aims to assess the application of Fama and French three factors models in Vietnam's stock market from Jan 2007 to Dec 2011. The selected listing companies must continuously had been listed for at least 2 years and non-stop trading or moved to the other exchange. According that, in 2007 the author selected 162 companies, and in 2008, 2009, 2010 and 2011, there were 204, 308, 382, 382 listed companies were selected in turn. The author also divided them into 6 groups: B/H, B/M, B/L; S/H, S/M and S/L. In which, portfolios B and S are to evaluate the effects of size and risk scale to the profitability rate (size measured by capitalization of the stock market) and portfolios H, M and L are measuring the effects of book to market value. The result are appearing that Fama and French three factor models explaining the relationship between rate of return and risk in superior to CAPM, especially in these portfolios: S/L, S/H and B/L.