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?

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Possible Answers

The CAPM model explains the most variability, so alpha is higher
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The CAPM model explains the most variability, so alpha is lower
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The Fama-French 5 Factor model explains the most variability, so alpha is higher
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The Fama-French 5 Factor model explains the most variability, so alpha is lower
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