A New Measure of Asset Pricing: Friction-Adjusted Three-Factor Model

• 발행기관: 한국유통과학회
• 저자명: Immas NURHAYATI Endri ENDRI
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 7 No.12, 605~613쪽, 전체 9쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2020.12.30

영문 초록

In unfrictionless markets, one measure of asset pricing is its height of friction. This study develops a three-factor model by loosening the assumptions about stocks without friction, without risk, and perfectly liquid. Friction is used as an indicator of transaction costs to be included in the model as a variable that will reduce individual profits. This approach is used to estimate return, beta and other variable for firms listed on the Indonesian Stock Exchange (IDX). To test the efficacy of friction-adjusted three-factor model, we use intraday data from July 2016 to October 2018. The sample includes all listed firms; intraday data chosen purposively from regular market are sorted by capitalization, which represents each tick size from the biggest to smallest. We run 3,065,835 intraday data of asking price, bid price, and trading price to get proportional quoted half-spread and proportional effective half-spread. We find evidence of adjusted friction on the three-factor model. High/low trading friction will cause a significant/insignificant return difference before and after adjustment. The difference in average beta that reflects market risk is able to explain the existence of trading friction, while the difference between SMB and HML in all observation periods cannot explain returns and the existence of trading friction.

목차

1. Introduction

2. Literature Review

3. Sample and Methodology

4. Results and Discussion

5. Conclusion

References

키워드

Unfrictionless Markets Trading Friction Adjusted Three-Factor Transaction Cost