Note I am happy to understand the obvious, which is that risk factors are statistics that can be calculated for a set of stocks that in a regression analysis are variables that explain in the usual statistical sense the return of a portfolio of stocks. As such they help us understand why returns are what they are. This is in the usual meaning of understand that we have related certain properties of something to certain other properties. In investing those relationships are correlations found in sets of happenstance date without an underlying theoretical structure to unify our understanding. The entire enterprise is an exercise in descriptive statistics.
In all fairness there is a relational concept in there that mean return should be greater the more variation there is in return which is dragged in by the concept of Beta in the CAPM model. Fama and French then extend that model by encorporating additional factors of the nature of a return.
I have not gotten any further than that.
In all fairness there is a relational concept in there that mean return should be greater the more variation there is in return which is dragged in by the concept of Beta in the CAPM model. Fama and French then extend that model by encorporating additional factors of the nature of a return.
I have not gotten any further than that.
Statistics: Posted by dbr — Thu Aug 15, 2024 4:43 pm — Replies 129 — Views 15726