标题: Fame French model [打印本页] 作者: sabaruch 时间: 2011-7-13 16:27 标题: Fame French model
Does anyone remember how to calculate the required return from the fame French model?作者: WarrenB1 时间: 2011-7-13 16:27
Similar to CAPM but adds premiums for small size stocks as well as high book to market stocks (that is, the premiums are multiplied by the sensitivies)
Then that Pastaur or whatever adds a liquidity premium作者: ayaz_mahmud369 时间: 2011-7-13 16:27
Nvm I got it but for you people who are confused like me,
It's just required return= rfr + market beta*market risk premium + size beta*size premium + value beta*value premium作者: bingbingliang 时间: 2011-7-13 16:27
r= rf + B,MKT + B,BMS + B,HML
where B is beta for each respective factor
MKT is the standard market premium
BMS is the size premium factor; Big minus small (the return from shorting large caps and investing those in small caps)
HML is the Value Premium factor, High Minus Low (the return from shorting high market to book value stocks, and investing them in low market to book value ratio stocks)
Pasteur Strambaugh is the same thing, but it has a liquidity premium factor as well. As you could guess, that factor is the return that would result from shorting high liquidity investments, and investing them in low liquidity investments
