| المستخلص: |
This study empirically examines the relationship between stock returns and beta, size, and the book-to-market equity ratio, using data from Doha Securities market (DSM) in Qatar. Both time-series and cross-section regressions are made to test the risk-return relationship, for the period January 2005 to December 2007 weekly data. We examines capital asset pricing model (CAPM) and Fama-French three-factor model. Testing CAPM shows that market β is not able to capture all the variations in average returns. There exist some firm-specific factors affecting the stock return. Moreover, market factor ranks first in explanatory power, but there is no clear ranking of the other two factors in determining average returns. The explanatory power of size factor dominates the explanatory power of book-to-market equity factor. The majority of the evidence is consistent with the CAPM. Consequently, we do not reject the CAPM outright based on our finding. Testing of Fama-French model, reveal that among the three factors, market risk appears to be prevalent in DSM. There exists some amount of size and value effect with certain categories of companies. We find evidence of bidirectional causality between small companies with high book to market ratios (S/H) and big companies with medium book to market ratios (B/L). Contradicting with earlier studies we did not find any influence of value factor (HML) with any of the factors at conventional significant levels. Size factor (SMB) affected by small companies with low book to market ratios (S/L) and small companies with medium book to market ratios (S/M). Market risk factor (MKt) (Rm -Rf) affected only by small companies with low book to market ratios (S/L). Finally through variance decompositions we find some evidence of size and value effect. According to the relevance of the information criteria the variables can be ranked as follows: B/L, S/M, B/M, SMB, B/H. HML, S/H, MKT, S/L The results of the this study will provide better insights to investors in understanding the risk return characteristics that exist among the factors which affect stock prices.
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