Fama and French Three Factor Model
Created by Eugene Fama and Kenneth French to describe the expected return of a portfolio. Their model includes the market exposure (known as beta in the Capital Asset Pricing Model) plus two other risk factors: SMB (Small Minus Big) and HML (High Minus Low.) SMB accounts for the tendency for stocks of firms with small market capitalizations generate higher returns, while HML accounts for the tendency that value stocks (of firms with high Book to Market ratios) generating higher returns.
Nearby TermsFallout risk False accounting Fama and French Three Factor Model Fama, Eugene F. Family of funds
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University