All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Claude Bergeron
''The three-factor model without a linear return generating process''
( 2021, Vol. 41 No.3 )
From a theoretical point of view, the Fama and French three-factor model requires the following implicit assumptions: (i) the excess return of an asset is correlated with market, size, and book-to-market factors, and (ii) the return generating process is linear. In this note, we demonstrate that the linearity assumption of the return generating process can be relaxed. This suggests that assumption (i) alone is sufficient for the three-factor model.
Keywords: Asset pricing, Three-factor model, Linearity assumption
JEL: G1 - General Financial Markets
G3 - Corporate Finance and Governance: General
Manuscript Received : Mar 03 2021 Manuscript Accepted : Sep 17 2021

  This abstract has been downloaded 551 times                The Full PDF of this paper has been downloaded 153784 times