Asset pricing models in the Nordic Stock Market

Abstract

This thesis investigates the Fama and French asset pricing models on a sample of all firms, green firms, and half-green firms in the Nordic stock market. We find that when fitted to the full sample, the factor models of Fama and French provide a good explanation of the cross-sectional variance of return and outperform the CAPM. The sample of green firms contains extensive sample errors negating our ability to distinguish the tested model. The factor models explain less of the variance in excess return of half-green firms than all firms. We find evidence that the investment factor is more important when describing the excess return of half-green firms than all firms in the Nordic stock market