Common risk factors in the returns on stocks and bonds

Fama, Eugene F.; French, Kenneth R.

doi:10.1016/0304-405x(93)90023-5

Cited by 25,754Financial Markets and Investment StrategiesFinancial Analysis and Corporate GovernanceFinancial Risk and Volatility Modeling

Common risk factors in the returns on stocks and bonds

Fama, Eugene F., French, Kenneth R.·1993·Journal of Financial Economics

DOI 10.1016/0304-405x(93)90023-5

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Machine learning methods such as support vector machines and artificial neural networks are rarely considered by financial economists, who prefer econometric, often linear methods.
“Such methods are rarely considered by financial economists who prefer econometric, often linear methods (Campbell & Thompson, 2008; Fama & French, 1993, 2012).”
From Bridging the divide in financial market forecasting: machine learners vs. financial economists (2016) · cites this paper as Fama & French, 1993
The risk of common stock investments can be parsimoniously summarized as risk related to the market, firm size, and a firm's book-to-market ratio.
“Fama and French (1993) argue that the risk of common stock investments can be parsimoniously summarized as risk related to the market, firm size, and a firm's book-to-market ratio.”
From Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors (2000) · cites this paper as Fama and French (1993)
The three-factor model provides a reasonable adjustment for the small stock tilt of individual investors.
“The threefactor model provides a reasonable adjustment for this small stock tilt.”
From Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors (2000) · cites this paper as Fama and French (1993)

CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*
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THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS**This paper is another in a series of interrelated theoretical and statistical studies of corporate financial and investment policies being made under grants from the Rockefeller Foundation, and more recently the Ford Foundation, to the Harvard Business School. The generous support for this work is most gratefully acknowledged. The author is also much indebted to his colleagues Professors Bishop, Christenson, Kahr, Raiffa, and (especially) Schlaifer, for extensive discussion and commentary on an earlier draft of this paper; but responsibility for any errors or imperfections remains strictly his own.[Professor Sharpe's paper, “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Journal of Finance, September 1964) appeared after this paper was in final form and on its way to the printers. My first section, which parallels the first half of his paper (with corresponding conclusions), sets the algebraic framework for sections II, III and VI, (which have no counterpart in his paper) and for section IV on the equilibrium prices of risk assets, concerning which our results differ significantly for reasons which will be explored elsewhere. Sharpe does not take up the capital budgeting problem developed in section V below.]
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Authors: Fama, E. F., & French, K. R.
Affiliations: University of Chicago (US)
Corresponding author: Fama, Eugene F.
Venue: Journal of Financial Economics
Publisher: Elsevier BV
Published: 1993-02
Volume: 33
Issue: 1
Pages: 3-56
ISSN: 0304-405X (ISSN-L)
DOI: 10.1016/0304-405x(93)90023-5
OpenAlex: W1995834279
Cited by: 25,754
References: 31
Citations by year: 2026: 1224 · 2025: 1368 · 2024: 1316 · 2023: 1281 · 2022: 1315 · 2021: 1369 · 2020: 1403 · 2019: 1352 · 2018: 1300 · 2017: 1347 · 2016: 1220 · 2015: 1238 · 2014: 1204 · 2013: 1086 · 2012: 1223
FWCI: 45.53
Type: journal article
Language: en
Open access: closed
Licence: www.elsevier.com/tdm/userlicense/1.0/ (tdm)
Locations: Journal of Financial Economics (publishedVersion)
RePEc: Research Papers in Economics (submittedVersion)
Topics: Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
Social Sciences › Economics, Econometrics and Finance › Finance › Financial Risk and Volatility Modeling
Keywords: shared risk factors, stock returns, bond returns, market factors, firm size, book-to-market equity, bond maturity, default risk, asset pricing

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