A Fama-French Replication and Extension including Momentum: Evidence from the US and the UK Stock Market

Abstract

This paper examines the effects of size, value, profitability, investments, and momentum on the cross-sectional and time-series relation between expected returns and risk in the US and the UK markets, from July 1990 to December 2021. We replicate the international study of Fama and French (2017) and extend the research by constructing a six-factor model, adding momentum. The objective is to analyze which model performs better in the markets. The robustness of the models is tested through factor spanning regressions, GRS tests, and Fama-MacBeth regressions. For the six-factor model, evidence shows that, through factor spanning regressions, the SMB and HML factors in the US and the HML, RMW, and CMA in the UK are redundant. Further, the Fama-MacBeth regressions show that the models unconvincingly explain excess returns.