A Five-Factor Asset Pricing Model
Eugene F. Fama
University of Chicago - Finance
Kenneth R. French
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)
Fama-Miller Working Paper
A five-factor model directed at capturing the size, value, profitability, and investment patterns in average stock returns is rejected on the GRS test, but for applied purposes it provides an acceptable description of average returns. The model’s main problem is its failure to explain the low average returns on small stocks that invest a lot despite low profitability. The performance of the model is not sensitive to the specifics of the way its factors are defined, at least for the definitions considered here.
Number of Pages in PDF File: 53
JEL Classification: G12working papers series
Date posted: June 30, 2013 ; Last revised: May 11, 2014
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