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What do the Fama-French factors add to C-CAPM?

Abhakorn, Pongrapeeporn, Smith, Peter N. and Wickens, Michael 2013. What do the Fama-French factors add to C-CAPM? Journal of Empirical Finance 22 , pp. 113-127. 10.1016/j.jempfin.2013.04.002

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Abstract

This study extends standard C-CAPM by including two additional factors related to firm size (SMB) and book-to-market value ratio (HML) — the Fama–French factors. C-CAPM is least able to price firms with low book-to-market ratios. The explanation of these returns, as well as the returns on the SMB and HML portfolios, is significantly improved by the inclusion of the HML factor. The component of the risk premia explained by consumption varies across size. We suggest that a possible explanation for the role of HML is its association with the investment growth prospects of firms.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Uncontrolled Keywords: Risk premium; Equity return; Stochastic discount factor; No-arbitrage condition
Publisher: Elsevier
ISSN: 0927-5398
Last Modified: 04 Jun 2017 05:41
URI: http://orca-mwe.cf.ac.uk/id/eprint/52867

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