Factor Analysis: Should You Use 3, 5, or 6 Factors to Evaluate Returns?

Mar 31, 2016 / By James Picerno
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Fama and French introduced their widely acclaimed three-factor model for evaluating stock returns about 20 years ago. In 2015, they added two more factors—profitability and investment—but still excluded momentum. While the new five-factor model may be an improvement, adding a sixth factor reveals even more, as this analysis of four actively managed funds shows.

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