#### Location

Stephen F Austin State University, Baker Pattillo Student Center, Regent's Suite A and Twilight Ballroom

#### Start Date

7-4-2011 4:00 PM

#### End Date

7-4-2011 8:00 PM

#### Description

To what extent are the factors of the Fama-French-Factor Asset Pricing Model related to rates of returns of the Stephen F. Austin State University Student Investment Roundtable Fund?

The Fama-French Model is believed to be a major improvement over the ever-popular Capital Asset Pricing Model, CAPM. The Capital Asset Pricing Model uses a single factor beta to compare the excess returns of a portfolio with the excess returns of the market as a whole, but is said to oversimplify the complex market. On the other hand, the Fama-French Model three-factor adds additional factors to the original CAPM equation. The Fama-French Model adds a factor for stocks with comparably low market capitalization and another factor for stocks with a high book to market value. Historically, these two types of stocks have tended to have had higher rates of return than the overall market. The addition of these two variables for the CSPM equation improves the accuracy of results. The Fama-French Three Factor model explains over 90% of the variation in excess returns of diversified portfolios returns compared with the average 80% given by the CAPM. Our goal is to determine the magnitude of explanatory power of the two additional Fama-French factors compared to the market rate of which the SIRF is expected to follow.

Examining the Student Investment Roundtable's Funds

Stephen F Austin State University, Baker Pattillo Student Center, Regent's Suite A and Twilight Ballroom

To what extent are the factors of the Fama-French-Factor Asset Pricing Model related to rates of returns of the Stephen F. Austin State University Student Investment Roundtable Fund?

The Fama-French Model is believed to be a major improvement over the ever-popular Capital Asset Pricing Model, CAPM. The Capital Asset Pricing Model uses a single factor beta to compare the excess returns of a portfolio with the excess returns of the market as a whole, but is said to oversimplify the complex market. On the other hand, the Fama-French Model three-factor adds additional factors to the original CAPM equation. The Fama-French Model adds a factor for stocks with comparably low market capitalization and another factor for stocks with a high book to market value. Historically, these two types of stocks have tended to have had higher rates of return than the overall market. The addition of these two variables for the CSPM equation improves the accuracy of results. The Fama-French Three Factor model explains over 90% of the variation in excess returns of diversified portfolios returns compared with the average 80% given by the CAPM. Our goal is to determine the magnitude of explanatory power of the two additional Fama-French factors compared to the market rate of which the SIRF is expected to follow.