Tuesday, December 7, 2010

Fama-French model (FFM) and Pastor-Stambaugh (PS) model

Fama-French model (FFM) and Pastor-Stambaugh (PS) model
marketsizerelative valueliquidity
Fama-French model (FFM)YesYesYes
Pastor-Stambaugh (PS) modelYesYesYesYes

PS model:
ri - Rf = eM * (rM - Rf) + eS * (rS - Rf) + eV * (rV - Rf) + eL * (rL - Rf)
ri - Rf = eM * RPM + eS * RPS + eV * RPV + eL * RPL

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