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Beyond CAPM: Evaluating the Fama & French Three-Factor Model on Nasdaq Stockholm

Almryd, Anton LU (2025) NEKP01 20251
Department of Economics
Abstract (Swedish)
This thesis examines whether the Fama & French three-factor model (1993) provides a better
explanation of Swedish stock returns than the traditional Capital Asset Pricing Model
(CAPM). Using data from firms listed on Nasdaq Stockholm between 2016 and 2024, six
portfolios were formed based on firm size and price-to-book ratio. Monthly returns were
calculated and regressed against both the market excess return (CAPM) and the three-factor
specification including SMB (size) and HML (value).
The results show that the three-factor model improves the explanatory power for most
portfolios, especially those containing small firms or value stocks. However, for portfolios
composed of large growth stocks, the CAPM performs equally well or... (More)
This thesis examines whether the Fama & French three-factor model (1993) provides a better
explanation of Swedish stock returns than the traditional Capital Asset Pricing Model
(CAPM). Using data from firms listed on Nasdaq Stockholm between 2016 and 2024, six
portfolios were formed based on firm size and price-to-book ratio. Monthly returns were
calculated and regressed against both the market excess return (CAPM) and the three-factor
specification including SMB (size) and HML (value).
The results show that the three-factor model improves the explanatory power for most
portfolios, especially those containing small firms or value stocks. However, for portfolios
composed of large growth stocks, the CAPM performs equally well or better. The average
values of SMB and HML were negative and not statistically significant during the sample
period, suggesting that the strength of these factors may vary over time.
The findings are generally consistent with the structure of the Fama & French model but
highlight that its effectiveness depends on the characteristics of the portfolios being analyzed.
The study contributes to the literature by applying a well-known empirical model to the
Swedish market and offers practical insights for investors and analysts interested in
factor-based approaches to portfolio construction. (Less)
Please use this url to cite or link to this publication:
author
Almryd, Anton LU
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Asset Pricing Stocks CAPM
language
English
id
9195273
date added to LUP
2025-09-12 10:50:53
date last changed
2025-09-12 10:50:53
@misc{9195273,
  abstract     = {{This thesis examines whether the Fama & French three-factor model (1993) provides a better
explanation of Swedish stock returns than the traditional Capital Asset Pricing Model
(CAPM). Using data from firms listed on Nasdaq Stockholm between 2016 and 2024, six
portfolios were formed based on firm size and price-to-book ratio. Monthly returns were
calculated and regressed against both the market excess return (CAPM) and the three-factor
specification including SMB (size) and HML (value).
The results show that the three-factor model improves the explanatory power for most
portfolios, especially those containing small firms or value stocks. However, for portfolios
composed of large growth stocks, the CAPM performs equally well or better. The average
values of SMB and HML were negative and not statistically significant during the sample
period, suggesting that the strength of these factors may vary over time.
The findings are generally consistent with the structure of the Fama & French model but
highlight that its effectiveness depends on the characteristics of the portfolios being analyzed.
The study contributes to the literature by applying a well-known empirical model to the
Swedish market and offers practical insights for investors and analysts interested in
factor-based approaches to portfolio construction.}},
  author       = {{Almryd, Anton}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Beyond CAPM: Evaluating the Fama & French Three-Factor Model on Nasdaq Stockholm}},
  year         = {{2025}},
}