Date of Award


Degree Type


Degree Name


Degree Program

Financial Economics


Economics and Finance

Major Professor

M. Kabir Hassan (Chair)

Second Advisor

Walter Lane, Member

Third Advisor

Luca Pezo, Member

Fourth Advisor

Selma Izadi, Member



In the recent decades, the Fama–French three-factor (1992, 1993, 1996) and five-factor (2015) models become the most widely used asset pricing models in the world. The U.S. (i.e., developed financial market) country-specific 2 additional factors in the 5-factor model, RMW and CMA or profitability and investment premium, empirically cannot further capture the return variation of the classic three-factor/characteristic in China’s stock market (i.e., developing financial markets). In China, based on our result, therefore, the classic three-factor outperforms the five-factor model. We do not presume that firms in different countries share the same features. Following Liu, Stambaugh, and Yuan (2019), we replaced the price-to-book ratio (PB) with the earnings-price ratio (EP). By using Shanghai and Shenzhen exchange stocks, we suggested that the explanatory uncertainty of HML only exists in the five-factor model. In the Fama MacBeth regression, the SMB and HML are significant factors in the three-factor model, explaining the return variation in China. Surprisingly, though the size effect is impressively persistent in both models, the ratio effect has limited explanatory power.

JEL Codes: C5, G1, G2

JEL Keywords: Fama-French Factors; Asset Pricing; Chinese Stock Market


We analyze Federal Deposit Insurance Corporation (FDIC) managed 4273 loan sales transactions between 1994 and 2019 that include two major financial crises of the modern times: the bubble of 2001, and the global financial crisis of 2008 and 2009. We find that loan sales discounts, asset quality, industry classifications, compositions and buyers interest vary significantly during financial recessions and non-recessionary periods. Industry classifications affect loan sales discount rates. Loan sales discounts are inversely related with asset quality. While the non-performing and lower quality loans are sold at higher discounts, the sub-performing and the performing loans are sold at lower discount. Our evidences backup Demsetz’ s (2000) hypotheses that banks with limited branches and high reputation are more likely participate in the secondary market in order to erode the loan origination problem and diversify the current loan portfolio.

JEL Codes: G210, G280

JEL Keywords: Banks; Depository Institutions; Financial Institutions and Services: Government Policy and Regulation; Bailout, FDIC.


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