Hands-On Machine Learning for Algorithmic Trading

From the CAPM to the Fama-French five-factor model

Risk factors have been a key ingredient to quantitative models since the Capital Asset Pricing Model (CAPM) explained the expected returns of all N assets using their respective exposure to a single factor, the expected excess return of the overall market over the risk-free rate . The model takes the following linear form:

This differs from classic fundamental analysis a la Dodd and Graham where ...