How to Calculate Fama-French Three-Factor Model?
Fama-French Three-Factor Model calculator uses Excess Return on Asset = Asset Specific Alpha+Beta in Forex*(Return on Market Portfolio-Risk Free Rate)+(Sensitivity of the Asset to SMB*Small Minus Big+Sensitivity of the Asset to HML+Error Term) to calculate the Excess Return on Asset, The Fama-French Three-Factor Model formula is defined as an asset pricing model that expands upon the Capital Asset Pricing Model (CAPM) by considering additional factors that influence stock returns. . Excess Return on Asset is denoted by Rexc symbol.
How to calculate Fama-French Three-Factor Model using this online calculator? To use this online calculator for Fama-French Three-Factor Model, enter Asset Specific Alpha (αi), Beta in Forex (β_{F}), Return on Market Portfolio (R_{mkt}), Risk Free Rate (R_{f}), Sensitivity of the Asset to SMB (si), Small Minus Big (SMB), Sensitivity of the Asset to HML (h_{ml}) & Error Term (E_{i}) and hit the calculate button. Here is how the Fama-French Three-Factor Model calculation can be explained with given input values -> 18.54 = 8+0.07*(5-3)+(2*3+3.1+1.3).