Validity of Fama French Five Factor Asset Pricing Model: A research on Borsa Istanbul

Fama and French thought that the Three-Factor Asset Pricing Model was insufficient in explaining stock returns, so Fama and French started to use the Five-Factor Asset Pricing Model in their studies. With this study, examinations have been made by adding investment and profitability variables to existing variables. The aim of this study is to test the validity of the Fama-French Five Factor Asset Pricing Model for Borsa Istanbul 100 Index. In this context, quarterly data for the period 2010-2019 of 67 manufacturing enterprises included in the Borsa Istanbul 100 Index, whose data can be accessed regularly, were used. As a result of the study, it was concluded that the variables of investment, profitability, PD / DD ratio and PRF ratio, known as the market risk premium, were positively significant and valid for the relevant period and companies, and the LNPD value was statistically insignificant and invalid. Thus, it was concluded that the validity of the Fama French Five Factor Model in Borsa Istanbul 100 Index, except for the LNPD variable, was obtained and these firms would benefit from their estimates while investing.