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Does the Fama-French three-factor model and Carhart four-factor model explain portfolio returns better than CAPM?: - A study performed on the Swedish stock market.
Karlstad University, Faculty of Arts and Social Sciences (starting 2013), Karlstad Business School.
2016 (English)Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This essay will compare the capital asset pricing model (CAPM), Fama and French threefactor

model and Carhart´s four-factor model, to see which of these models that can explain

portfolio excess returns best on the Swedish stock market. This thesis will tempt to validate

the three and four-factor models because of the limited amount of research done on the

Swedish stock market. The results indicate that the three-factor model improves explanatory

power for portfolio returns in comparison to the CAPM, and the four-factor model gives a

small improvement in the explanatory power compared to the three-factor model. The results

also indicate that all models have a low explanatory power when the market is volatile.

Place, publisher, year, edition, pages
2016. , 46 p.
Keyword [en]
Fama and French three-factor model, Carhart´s four-factor model, Capital Asset Pricing Model (CAPM), portfolio returns, excess returns, Swedish stock market
National Category
URN: urn:nbn:se:kau:diva-43784OAI: diva2:944713
Subject / course
Educational program
Programme in Business and Economics
2016-06-09, Karlstad, 20:47 (Swedish)
Available from: 2016-06-30 Created: 2016-06-29 Last updated: 2016-10-11Bibliographically approved

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