A comparison between the Fama and French's three-factor and five-factor models to describe the return of the growth and value stock

The purpose of this paper is to compare the explanatory power of Fama and French`s three-factor and five-factor models to describe the return of the growth and value stock in listed companies in Tehran Stock Exchange. For this purpose, a sample consisting of 238 companies during the period of 2003 to 2013 has been selected. To test the research hypotheses, the panel data approach with paternoster test et al (1998) and multiple regressions have been used. The findings indicate that the explanatory power of Fama and French`s five-factor model has more robust than the three-factor model to describe the return of growth and value stocks. Result also show that this effect is more powerful in growth companies than value firms in Tehran Stock Exchange.