An empirical study of profitability, investment and momentum factors in the Hong Kong stock market

This thesis aims at examining the saliency and soundness of profitability, investment and momentum factors in explaining the excess return in the Hong Kong stock market. The research is motivated by Fama and French’s (2015) Five-Factor Model and Carhart’s (1997) momentum factor, using the regression analysis on 21-year worth of Hong Kong equity data from 1995 to 2015 obtained from Datastream. The dependent variables are four independent sets of 25 (5×5) diversified portfolios of double sorting by size and book-to-market ratio, size and operating profitability, size and investment as well as size and momentum. Independent variables include Fama and French’s (1993) three factors namely market premium, size and book-to-market ratio plus three additional factors including operating profitability, asset investment and momentum.