# Fundamental Factor Models: Intercept

Why is the risk-free rate not used as an intercept in a fundamental factor model?

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Do you think that it should be?

If so, why?

Simplify the complicated side; don't complify the simplicated side.

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Isn’t an asset supposed to return at least the risk-free rate?

If we can’t consider RFR, then what is the intuition behind the fundamental factor model?

Isn’t an asset supposed to return at least the risk-free rate?

Supposed to?

If we can’t consider RFR, then what is the intuition behind the fundamental factor model?

Do you want intuition, or do you want understanding?

The understanding is that it’s impossible for all of the fundamental factor exposures to be zero simultaneously, so the intercept is not a return that would be achieved.  (Indeed, for many fundamental factor models, it’s impossible for any of the factor exposures to be zero, ever.)

Simplify the complicated side; don't complify the simplicated side.

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rfr in a factor model? Isn’t it because the calculation is the return above the rfr.

Be yourself. The world worships the original.

Alright, thanks for answering me; what I intend to ask is, in practical terms (definitely depending on circumstance), what can be used as an intercept for fundamental factor models?