Abstract

http://ssrn.com/abstract=481881
 
 

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Understanding Risk and Return, the CAPM, and the Fama-French Three-Factor Model


Kent L. Womack


University of Toronto - Rotman School of Management

Ying Zhang


affiliation not provided to SSRN



Abstract:     
The first-year MBA finance course regularly includes a discussion of the CAPM. This teaching note extends the typical textbook discussion of CAPM in two ways. First, it provides a step-by-step approach explaining empirically how one can calculate beta and alpha using simple regression. Second, it extends the risk-return asset pricing relationship to the richer three-factor Fama-French model. By examining and controlling for the multiple betas of this model, students can come to understand mutual fund investment styles and multi-factor alphas.

Number of Pages in PDF File: 14

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Date posted: December 19, 2003  

Suggested Citation

Womack, Kent L. and Zhang, Ying, Understanding Risk and Return, the CAPM, and the Fama-French Three-Factor Model. Tuck Case No. 03-111. Available at SSRN: http://ssrn.com/abstract=481881

Contact Information

Kent L. Womack (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada

Ying Zhang
affiliation not provided to SSRN ( email )
No Address Available
Feedback to SSRN


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Citations:  3
Footnotes:  6

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