Pls confirm my understanding. For CAPM & APT, it’s the beta which is on the x axis & market risk premium as the slope? Usually its used for calculating required return. For Market Model & Multifactors Model (Marco Economic factors), it’s the betas which are the slope and the various factor as the values on x axis (regression technique)? Usually its used for expected return. So for Fama French model, from my reading (schwesers) its conflicting, they call it multi factors but its for calculating required return. Its mentioned its an addition to the CAPM (just like APT) buy limited to 2 more factors, (small caps – big calls) & (High book to market ratio – Low book to market). So I presume that the betas mentioned there are NOT the slope but values on x axis just like CAPM. The slopes are the factors (i.e. Small Caps – Big Caps). Am I right? Cheers
fama french is a regression model. things that they call betas are actually “coefficients” for the factors. pastor straumbaugh adds an extra liquidity factor to the fama french model. If you ran a regression the regression coefficients that you get are the betas.
so for FF the betas are the slope … not the factor (risk premiums) so its different from APT & CAPM where the slopes are the Market risk premiums etc not the beta… Im not that sure you know…