Profitability as a Fourth Stock Return Forecast Factor
July 16, 2013 - Size Effect, Value Premium
Does adding profitability (see “Gross Profitability as a Stock Return Predictor”) to the Fama-French three-factor model of future stock returns result in a better model? In the June 2013 draft of their paper entitled “A Four-Factor Model for the Size, Value, and Profitability Patterns in Stock Returns”, Eugene Fama and Kenneth French examine whether profitability usefully augments their three-factor model. They… Keep Reading