Cross-sectional and multivariate tests of the CAPM and Fama-French three-factor model

摘要

This project tests the Sharpe(1964)-Lintner(1965)-Black(1972) Mean-Variance CapitalAsset Pricing Model (CAPM) and Fama-Frenchu27s (1993) Three-Factor Model using the crosssectionaland multivariate tests. Four different time periods of American stock market returnsranging from 1933 to 2003 are examined. Although both models are rejected by the multivariatetests, Fama and French argue that the Three-Factor Model fits better in the 1963-1993 period. Theresults in this paper covering different time periods from 1933 to 2003, however, do notunambiguously support Fama and Frenchu27s conclusion.