Extending the Fama and French model with a long term memory factor

• DOI: 10.1016/j.ejor.2019.07.071
• Publication Date: 2019-08-07T05:50:52Z
• Authors: M.N. López-García; J.E. Trinidad-Seg...; M.A. Sánchez-Granero; I. Pouchkarev
• Keywords: Factor (programming language); Hurst exponent; Sample (material); Long-term memory; Factor Analysis

Abstract In this paper, a new long-term memory factor for extending the well-known Fama and French model is proposed and discussed thoroughly. The new long-term memory factor is based on the Hurst exponent and is calculated using the fractal dimension (FD) algorithm. The relevance of the new factor is illustrated using a sample of 1500 largest U.S. companies from different sectors.