Multifactor explanation of security returns in South Africa

Osita Chukwulobelu, Samuel Fosu, William Coffie

Research output: Contribution to journalArticlepeer-review


This paper evaluates the performance of the Fama and French threefactor model in South Africa for individual securities. We employed a multivariate time series methodology similar to Fama and French. The empirical results contradict the theoretical proposition of the Fama-French model and are inconsistent with the results documented by most studies in the developed and some emerging markets. The size and value premia are very weak when included in the regression model. Furthermore, the Fama and French three-factor model is unable to explain the return-generating process of securities trading on the Johannesburg Stock Exchange. This has important implication for corporate managers, investors as well as fund and portfolio managers in terms of estimating cost of equity, rate of return and portfolio allocation.

Original languageEnglish
Pages (from-to)380-397
Number of pages18
JournalInternational Journal of Management Practice
Issue number4
Publication statusPublished - 2014
Externally publishedYes


  • Fama-French three factor model
  • Johannesburg Stock Exchange
  • Security returns
  • Size and value premia
  • South Africa

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management


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