The empirical successes of [the three-factor model] suggest… - Eugene Fama

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The empirical successes of [the three-factor model] suggest that it is an equilibrium pricing model, a three-factor version of Merton’s (1973) intertemporal CAPM (ICAPM) or Ross’s (1976) arbitrage pricing theory (APT). In this view, SMB and HML mimic combinations of two underlying risk factors or state variables of special hedging concern to investors.

Eugene Fama

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About Eugene Fama

Eugene Francis "Gene" Fama (born February 14, 1939) is an American economist and Nobel laureate in Economics with Lars Peter Hansen and Robert J. Shiller, known for his work on and , both theoretical and empirical.

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Also Known As: Gene

Alternative Names: Eugene Francis Fama • Eugene Francis "Gene" Fama • Gene Fama • Fama

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Burton Malkiel Warren Buffett Benjamin Graham Peter Lynch Robert Haugen

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The question is when is good? The answer is never.

Firms that have a high BE/ME (a low stock price relative to book value) tend to have low earnings on assets. Conversely, low BE/ME (a high stock price relative to book value) is associated with persistently high earnings.

If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it's a big negative sign

The empirical successes of [the three-factor model] suggest that it is an equilibrium pricing model, a three-factor version of Merton’s (1973) intert… - Eugene Fama

About Eugene Fama

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Works in ChatGPT, Claude, or Any AI

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