Fama-French Model and the Time Variation in Systematic Risk

In this study Fama and French three-factor model is augmented to take into account the time variation in systematic risk (as measured by time-varying betas), in addition to size and book-to market equity factors. It is investigated whether the two factors are still priced on the stock exchange of India if time variation in beta is considered. The study finds that both the size effect and the value effect persist and therefore, it can be concluded that the Fama-French model is robust after taking into account the time variation in systematic risk