Beyond CAPM: Evaluating the Fama & French Three-Factor Model on Nasdaq Stockholm
(2025) NEKP01 20251Department 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:
http://lup.lub.lu.se/student-papers/record/9195273
- author
- Almryd, Anton LU
- supervisor
- organization
- course
- NEKP01 20251
- year
- 2025
- 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}},
}