Skip to content

Carhart Model

March 14, 2016

Carhart noticed 3 Groups of stocks tend to have higher returns

  • Small Cap Stocks symbolized SMB (Small Minus Big)
  • Value Stocks symbolized HML (High Minus Low)
  • Momentum Stocks symbolized WML (Winners Minus Losers)

This model is based on CAPM and Fama-French Models

E(Rp) = Rf + ßp1(RMRF) + ßp2(SMB) + ßp3(HML) + ßp4(WML)

RMRF = return of weighted index in excess of T-Bills

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: