Eugene F. Fama is a professor at the University of Chicago Booth School of Business and a 2013 Nobel laureate in economics. Often called the “father of modern finance,” he is best known for the efficient-market hypothesis and, with kenneth-french, for developing the dominant multi-factor asset pricing models.
Key contributions in this collection
- Fama and French (1992): demonstrated that beta has no explanatory power for cross-sectional returns and that size and book-to-market capture the variation
- Fama and French (1993): introduced the three-factor model (RM-RF, SMB, HML) with both stock and bond factors
- Fama and French (2015): extended to the five-factor model, adding RMW and CMA
- Fama and MacBeth (1973): introduced the two-pass cross-sectional regression methodology that became the standard for testing asset pricing models; provided early evidence supporting the capm (t=2.57 on beta)
- Fama and French (2012): documented value and momentum premia across four global regions; see international-factor-evidence
- Fama and French (2017): extended the five-factor model internationally; see international-factor-evidence
Intellectual stance
Fama maintains a risk-based interpretation of factor premia: size and value proxy for sensitivity to undiversifiable economic risks. He has been skeptical of momentum as a priced factor, viewing it as lacking theoretical grounding in rational asset pricing, which is why UMD was never included in his own models.
Affiliations
University of Chicago Booth School of Business. Consultant to and board member of Dimensional Fund Advisors.
Sources
- The Cross-Section of Expected Stock Returns (File, DOI)
- Common risk factors in the returns on stocks and bonds (File, DOI)
- A five-factor asset pricing model (File, DOI)
- Risk, Return, and Equilibrium: Empirical Tests (File, DOI)
- Size, Value, and Momentum in International Stock Returns (File, DOI)
- International Tests of a Five-Factor Asset Pricing Model (File, DOI)