This paper proposes twelve fundamental factors model in Egypt as price risk factors, which were formed according to [1]. Then, the paper examines fundamental factors after excluding medium-size stocks which were divided into three groups: top 30%, medium 40%, and bottom 30% and that most of the stocks lie in the medium which might lead to bias in measuring the effect of fundamental factors as a
... [Show full abstract] price of risk factors. The study utilized a sample of 48 companies out of 100 stocks listed on EGX100 index which were the active stocks among the study period. The study used monthly data from January 2005 until December 2016. And, data have been categorized within this research into five, whole period from January 2005 to December 2016, normal period from January 2005 to December 2007, post-global financial crisis period from January 2008 to December 2010, post-Egyptian revolution from January 2011 to December 2013 and the economic recovery period from January 2014 to December 2016. The study then Utilized Gibbons Ross Shaken (GRS) to determine which factor model can estimate the risk premium better than others for each proposed period. This methodology was repeated two times. The first which follow previous fundamental factors: three, four, five, six, eight, and twelve factors models. Second, repeating the same methodology but broking down the size into three groups excluding medium one to become (3×2) size portfolios. The results shows that the twelve-factor model of 3x2 proposed portfolios is the best model for estimating risk premium in the recovery period, six-factor model 3x2 portfolios is the most reliable for unstable periods and twelve-factor model of 2x3 portfolios for normal growing periods. Accordingly, we recommend using twelve-factor model of 2x3 portfolios for growing periods which addressing Egyptian current period.
