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
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