Fama–French three-factor model

In asset pricing and portfolio management, the Fama–French three-factor model is a statistical model designed in 1992 by Eugene Fama and Kenneth French to describe stock returns. Fama and French were colleagues at the University of Chicago Booth School of Business, where Fama still works. In 2013, Fama shared the Nobel Memorial Prize in Economic Sciences for his empirical analysis of asset prices. The three factors are:

  1. Market excess return,
  2. Outperformance of small versus big companies, and
  3. Outperformance of high book/market versus low book/market companies

There is academic debate about the last two factors.

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