Fama–French three-factor model

E431728

asset pricing model econometric model factor model financial model

The Fama–French three-factor model is a widely used asset pricing framework that extends the traditional CAPM by explaining stock returns through market risk, company size, and value factors.

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All labels observed (7)

Label	Occurrences
Fama–French three-factor model canonical	5
Fama–French five-factor model	2
Carhart four-factor model	1
Fama–French 3-factor model	1
The Cross-Section of Expected Stock Returns	1
“Common Risk Factors in the Returns on Stocks and Bonds”	1
“The Cross-Section of Expected Stock Returns”	1

How this entity was disambiguated

This entity first appeared as the object of triple T4329463 — resolving that mention is where its identity was fixed. The disambiguator weighed these candidate entities and picked the highlighted one (or “None”, minting a new entity). This is how homonymy is resolved: the same surface form can point to different entities.

NED1 Entity disambiguation (via context triple) gpt-5-mini-2025-08-07

Target entity: Fama–French three-factor model
Context triple: [Eugene Fama, knownFor, Fama–French three-factor model]

A. Frisch–Waugh–Lovell theorem
The Frisch–Waugh–Lovell theorem is a fundamental result in econometrics that shows how the coefficients of a multiple linear regression can be obtained by first partialling out (regressing out) other explanatory variables.
B. Black–Scholes model
The Black–Scholes model is a fundamental mathematical framework in financial economics for pricing options and other derivatives by modeling asset prices as stochastic processes.
C. Markowitz
Markowitz is a locality in what is now Poland that is historically notable as the birthplace of the classical philologist Ulrich von Wilamowitz-Moellendorff.
D. Fisher separation theorem
The Fisher separation theorem is a foundational result in financial economics stating that a firm's investment decision can be made independently of its owners' consumption preferences, focusing solely on maximizing the present value of the firm.
E. The Theory of Corporate Finance
The Theory of Corporate Finance is a comprehensive textbook by economist Jean Tirole that systematically develops modern corporate finance theory using tools from contract theory and information economics.
F. None of above. chosen
G. Unsure - the case is ambiguous/there is not enough information to decide.

NED2 Entity disambiguation (via description) gpt-5-mini-2025-08-07

Target entity: Fama–French three-factor model
Target entity description: The Fama–French three-factor model is a widely used asset pricing framework that extends the traditional CAPM by explaining stock returns through market risk, company size, and value factors.

A. Frisch–Waugh–Lovell theorem
The Frisch–Waugh–Lovell theorem is a fundamental result in econometrics that shows how the coefficients of a multiple linear regression can be obtained by first partialling out (regressing out) other explanatory variables.
B. Black–Scholes model
The Black–Scholes model is a fundamental mathematical framework in financial economics for pricing options and other derivatives by modeling asset prices as stochastic processes.
C. Markowitz
Markowitz is a locality in what is now Poland that is historically notable as the birthplace of the classical philologist Ulrich von Wilamowitz-Moellendorff.
D. Fisher separation theorem
The Fisher separation theorem is a foundational result in financial economics stating that a firm's investment decision can be made independently of its owners' consumption preferences, focusing solely on maximizing the present value of the firm.
E. The Theory of Corporate Finance
The Theory of Corporate Finance is a comprehensive textbook by economist Jean Tirole that systematically develops modern corporate finance theory using tools from contract theory and information economics.
F. None of above. chosen

Statements (50)

Predicate	Object
instanceOf	asset pricing model ⓘ econometric model ⓘ factor model ⓘ financial model ⓘ
addresses	size effect in stock returns ⓘ value effect in stock returns ⓘ
alsoKnownAs	FF3 model ⓘ Fama–French 3-factor model ⓘ linked to: Fama–French three-factor model
assumption	idiosyncratic risk is diversified away in well-diversified portfolios ⓘ investors are compensated for bearing systematic risk factors ⓘ
calibrationMethod	time-series regression of portfolio returns on factors ⓘ
component	alpha term representing abnormal return ⓘ beta coefficients for each factor ⓘ
coreIdea	expected stock returns are explained by exposure to three systematic risk factors ⓘ
criticizedFor	limited performance outside U.S. in some studies ⓘ not fully explaining momentum in stock returns ⓘ
developedBy	Eugene F. Fama ⓘ linked to: Eugene Fama Kenneth R. French ⓘ
empiricalBasis	observed higher returns for high book-to-market (value) stocks ⓘ observed higher returns for small-cap stocks ⓘ
equationForm	E(Ri) − Rf = αi + βiM (RM − Rf) + βiSMB SMB + βiHML HML ⓘ
explains	cross-section of average stock returns ⓘ
extends	Capital Asset Pricing Model ⓘ
factorName	HML ⓘ SMB ⓘ market factor ⓘ
field	asset pricing ⓘ financial economics ⓘ investment management ⓘ
HMLDefinition	High Minus Low, return of high book-to-market stocks minus low book-to-market stocks ⓘ
includesFactor	market risk factor ⓘ size factor ⓘ value factor ⓘ
influenced	Carhart four-factor model ⓘ linked to: Fama–French three-factor model Fama–French five-factor model ⓘ linked to: Fama–French three-factor model
introducedIn	1990s ⓘ
introducedInPublication	The Cross-Section of Expected Stock Returns ⓘ linked to: Fama–French three-factor model
marketFactorDefinition	excess return on the market portfolio over the risk-free rate ⓘ
marketPortfolioProxy	broad stock market index ⓘ
publicationYear	1992 ⓘ
publishedInJournal	Journal of Finance ⓘ
riskFreeRateRole	used as baseline to compute excess returns ⓘ
SMBDefinition	Small Minus Big, return of small-cap stocks minus return of large-cap stocks ⓘ
typicalHorizon	long-term average returns ⓘ
usedFor	cost of equity estimation ⓘ performance evaluation of hedge funds ⓘ performance evaluation of mutual funds ⓘ portfolio construction ⓘ risk attribution ⓘ
usesData	portfolio returns sorted by size and book-to-market ratio ⓘ

How these facts were elicited

Referenced by (12)

Full triples — surface form annotated when it differs from this entity's canonical label.

Eugene Fama → knownFor → Fama–French three-factor model ⓘ

Eugene Fama → notableWork → Fama–French three-factor model ⓘ

subject linked to: Fama

Fama–French three-factor model → alsoKnownAs → Fama–French 3-factor model ⓘ