The research introduces a five-factor asset pricing model that outperforms the well-known Fama–French three-factor asset pricing model in explaining stock returns. Surprisingly, when the two additional factors of profitability and investment are added to the original three-factor model, the value factor becomes superfluous. Although the five-factor model is not without its challenges, it is useful in describing the cross-sectional variance of the factors’ expected return.
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– Abstract author Paul R. Rossi, CFA