Application of the Fama-French Three Factor Model for a Five Stocks Portfolio in the US. Stock Market
Keywords:
Fama-French model, portfolio, optimized
Abstract
In this paper, the Fama-French three-factor model was applied to explore how to construct an optimized portfolio and achieve maximum returns, by using historical stock data for various industries, in the period from 2002 to 2022. The findings of this paper can be useful for first-time investors in various financial markets.
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References
1. Alves, Paulo. (2013). The Fama French Model or The Capital Asset Pricing Model: International Evidence. International Research Journal of Finance and Economics.
2. Banz, R.W., (1981), The Relationship between Return and Market Value of Common Stocks, Journal of Financial Economics, Vol. 9, No.1, pp. 3-18.
3. Datta, Smita & Chakraborty, Anindita. (2018). Fama French Three-factor Model: A Comparative Study. Effulgence-A Management Journal. 16. 32. 10.33601/effulgence.rdias/v16/i2/2018/32-41.
4. Fama, E. F., and K. R. French. 1992. The Cross-Section of Expected Stock Returns. The Journal of Finance 47 (2): 427–465. doi: https://doi.org/10.1111/j.1540-6261.1992.tb04398.x.
5. Haugen, Robert. (1995). The New Finance: The Case against Efficient Markets, Prentice Hall, Englewood Cliffs, New Jersey. Homsud, N., Wasunsakul, J., Phuangnark, S., Joongpong, J., (2009), A Study of Fama and French Three Factors Model and Capital Asset Pricing Model in the Stock Exchange of Thailand, International Research Journal of Finance and Economics, Issue. 25, pp. 31-40.
6. Yang, Haohua. (2022). Portfolio Optimization with Fama-French Model, F. Balli et al. (Eds.): ESFCT 2022, AEBMR 663, pp. 12–18, 2022.
2. Banz, R.W., (1981), The Relationship between Return and Market Value of Common Stocks, Journal of Financial Economics, Vol. 9, No.1, pp. 3-18.
3. Datta, Smita & Chakraborty, Anindita. (2018). Fama French Three-factor Model: A Comparative Study. Effulgence-A Management Journal. 16. 32. 10.33601/effulgence.rdias/v16/i2/2018/32-41.
4. Fama, E. F., and K. R. French. 1992. The Cross-Section of Expected Stock Returns. The Journal of Finance 47 (2): 427–465. doi: https://doi.org/10.1111/j.1540-6261.1992.tb04398.x.
5. Haugen, Robert. (1995). The New Finance: The Case against Efficient Markets, Prentice Hall, Englewood Cliffs, New Jersey. Homsud, N., Wasunsakul, J., Phuangnark, S., Joongpong, J., (2009), A Study of Fama and French Three Factors Model and Capital Asset Pricing Model in the Stock Exchange of Thailand, International Research Journal of Finance and Economics, Issue. 25, pp. 31-40.
6. Yang, Haohua. (2022). Portfolio Optimization with Fama-French Model, F. Balli et al. (Eds.): ESFCT 2022, AEBMR 663, pp. 12–18, 2022.
Published
2023-12-17
How to Cite
Paredes, L. M. G. (2023). Application of the Fama-French Three Factor Model for a Five Stocks Portfolio in the US. Stock Market. European Scientific Journal, ESJ, 24, 644. Retrieved from https://eujournal.org/index.php/esj/article/view/17577
Section
ESI Preprints
Copyright (c) 2023 Lizandra Maria Guillen Paredes
This work is licensed under a Creative Commons Attribution 4.0 International License.
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