Factor theory
In finance, factor theory is a collection of related mathematical models that explain asset returns as driven by distinct economic risks called factors. In less formal usage, a factor is simply an attribute or collection of related attributes that explain an asset's returns. The original factor model is the capital asset pricing model (CAPM), which predicts that an asset's expected return in excess of the risk-free rate is wholly determined by its exposure to the market factor. More formally, an asset's expected excess return is linearly related its co-movement with the market portfolio.
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Factor theory
In finance, factor theory is a collection of related mathematical models that explain asset returns as driven by distinct economic risks called factors. In less formal usage, a factor is simply an attribute or collection of related attributes that explain an asset's returns. The original factor model is the capital asset pricing model (CAPM), which predicts that an asset's expected return in excess of the risk-free rate is wholly determined by its exposure to the market factor. More formally, an asset's expected excess return is linearly related its co-movement with the market portfolio.
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In finance, factor theory is a ...... empirical failure of the CAPM.
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In finance, factor theory is a ...... ent with the market portfolio.
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Factor theory
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