Question

Should the F value be higher in a Capm model than a FF3 model?

Answer 1

Yes , It should be higher in a Capm model than a FF3 model, below example illustrates how this works:

check the F values in below example :

t How to Check the Validity of Fama and French Simierty, we can apply the same aterion fr checking the validity or me and French model. Гата nd French model uses the lowing equation for c oling bet88 of the three independent vanables e-5)H The [Hi Rt) term denotes the actual rick premium on a given security whle the three vaiables 15%, and cxpected rek premium is BRmR-10% BlSMB)-2%, and H(HML)-3%, then: Collectwely represent the expected nk premum. Value of intercept wll be zero f actual ck premium and expected nck premum are the same. For example, actual nak premium R 15%-α+15% 15%-15%-σ When value of the intercepl is nol zer,suggests Uhal the Faa and French model does not correcly predict the tisk premium on the given security. lhe validity 이 bUth CAPM and Farma and Hench models can be judged tror the value ot mlercept. An asset valuation model is consdered vald it .Value ot intercept iszero or claser to zero OR 2 The intercept is statistically naiqntcnt The itercapt considered stattsticaly insignncant when its p.value above 1 Consider the following ragrassion outpur of Fama and Franch Mode ง 017528063 0025757662 1231342346 1781446 062253626

However, How to Check th1ผู Validity of CAPM 4 0 CCEs21 above 0.1 . The be:s highiv significat as the Ryglue匕QCDOCI