Author(s)

Liuling Li¹, Qingyu Zhu^2*, Yang Mu¹

¹Economics School, Nankai University, China.
²College of Software, Nankai University, China.

In this paper, we analyze the sector of Software and Computer Services with a new Carhart four-factor model. The US is the leading world market for this sector and this sector is a source of significant economic opportunity in US. We compare this sector in US, UK and China to find out whether the US phenome-non has been replicated by other industrialized countries. LR, KS and AIC are used for testing parameter restrictions, residual check and model comparison, respectively. MLE is used to estimate parameters via Matlab. Empirical results show the Carhart 4 factors are still alive! The new 4-factor model fits the data well and has better in-sample fit than that of Carhart (1997) [1] and Fama-French (1993) [2]. This sector in these 3 countries can not earn statisti-cally significant extra Alpha returns. And the Beta value in this sector of US is close to the market.

Carhart (1997) 4-Factor (C), Standardized Standard Asymmetric Exponential Power Distribution (SSAEPD), EGARCH

Li, L. , Zhu, Q. and Mu, Y. (2017) Analysis of the Sector of Software & Computer Services with a New Carhart 4-Factor Model. Journal of Mathematical Finance, 7, 65-82. doi: 10.4236/jmf.2017.71004.