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

Pongrapeeporn Abhakorn (), Peter Smith () and Michael Wickens

Journal of Empirical Finance, 2013, vol. 22, issue C, 113-127

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.

Keywords: Risk premium; Equity return; Stochastic discount factor; No-arbitrage condition (search for similar items in EconPapers)
JEL-codes: C32 E44 G12 G14 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: What do the Fama-French Factors Add to C-CAPM? (2013) Downloads
Working Paper: What do the Fama-French factors add to CCAPM? (2013) Downloads
Working Paper: Consumption, Size and Book-to-Market Ratio in Equity Returns Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:22:y:2013:i:c:p:113-127

DOI: 10.1016/j.jempfin.2013.04.002

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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