Abstract

The aim of this study is to investigate return differences, accuracy and reliability of Capital Asset Pricing
Mode (CAPM) and Fama-French Model for Pakistan Stock Exchange. A time series data set from January 3, 2014 to
December 31, 2018 were used to analyze the yield spread estimates for 50 listed companies from KSE-100 list.. Most
companies provide important evidence that demonstrates the impact of size factor and book value on earnings
forecasts. According to the analysis, companies with lower book value ratios have better returns than companies with
higher ratios.In addition, size factor shows that large companies' portfolios offer higher returns than small one. The
additional factors of Fama-French model (size and value) provide more significant results than the single factor
model. The study analyzedthat Fama French provides more accurate results for the Pakistan Stock Exchange as
compare to CAPM. Therefore, Fama French model is suggested for yield measurement particularly forPakistan Stock
Exchange.

Key words: Portfolio, CAPM, Fama & French, Market Return, Size Premium, Value Premium, ExcessReturns