Get startedGet started for free

Alpha vs R-squared

The results of the 3 models you constructed are in line with Fama and French's findings, with the 5-factor model being superior at explaining portfolio returns.

Model Adjusted R-Squared
CAPM 0.7943
Fama-French 3 Factor 0.8194
Fama-French 5 Factor 0.8367

Without examining the regression intercepts directly, what do these results tell you about the alpha estimated by each model?

This exercise is part of the course

Introduction to Portfolio Risk Management in Python

View Course

Hands-on interactive exercise

Turn theory into action with one of our interactive exercises

Start Exercise