Thesis (Ph.D.) - Cairo University - Faculty of Commerce - Department of Business Administration

In this thesis, the researcher proposes an extended five-factor asset pricing model that is able to explain variations in stock returns in Egypt. Beside market, size and book- to-market ratio, the researcher investigates whether earnings-to-price, sales-to-price, dividends-to-price, liquidity and momentum are priced risk factors. Factors are formed using Fama and French (1993) methodology. Ordinary least squares (OLS) time series regression is run using the HAC method-Newey and West (1987) using 55 companies during the period from July 2005 to June 2013. The researcher documents significant size and value effects. However, the size effect is stronger than the value effect. Book-to-market ratio does not absorb the role of earnings-to-price ratio. Liquidity plays an important role in explaining stock returns. In addition, sales-to- price and dividends-to-price are redundant. Moreover, there is no momentum effect in Egypt. The results show that a model, which incorporates market factor, firm size, book-to-market, earnings-to-price and liquidity factors, yields better results than the competing models. The performance of the proposed model is assessed based on different evaluation criteria. The robustness of the model is tested for the separation of up and down market periods

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