Factors-based Asset Pricing Models: a literature review
DOI:
https://doi.org/10.47941/ijf.1034Keywords:
Asset Pricing, CAPM, Single-Factor and Multifactor Models, AnomaliesAbstract
In this paper we provide a literature review of the main factors-based asset pricing models, focusing in particular on factors related to firm characteristics. After presenting the Capital Asset Pricing Model, we describe first the most important empirical evidence that led to the well-known Fama-French three-factors model. Next, we highlight the most widely used multi-factors pricing models based on momentum, liquidity, investment and profitability, also outside the U.S. Finally, we discuss the ability of firm characteristics to predict the behavior of future stock returns.
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