An Assessment of Fama and French's Five-factor Model to Forecast the Return of the Growth and Value Stock

The purpose of this paper is to examine the explanatory power of Fama and French`s five-factor model to forecast 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 was selected. The research method is Library and correlation using multivariate regression. To test the hypotheses, this study relied on the two-stage Fama-MacBeth (1973) regression analysis using Eviews8 software; to analyze the data, description and infentional statishes were employed. The findings indicate that the effect of market, size and profitability on risk premium in value companies is significant but in growth companies the effect of five factors (market, size, growth, profitability and investment) on risk premium is significant. Results also show that this effect is more powerful in growth companies than value firms in Tehran Stock Exchange.