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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
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Author: knighttof3   😊 😞
Number: of 15060 
Subject: Re: What Did You Buy Today?
Date: 04/05/2025 8:10 PM
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French Fama 3-factor model. Meaning factor 1 is equities do better than bonds, factor 2 is small cap does better than large cap, and factor 3 is value does better than growth.

Fama & French later added a fourth factor, momentum IIRC. Maybe a fifth, quality.
All the simple models, like the dividend discount model, or (alpha and) beta, Sharpe and Sortino ratios, and especially Black-Scholes(-Merton) for option pricing, can be consigned to the dustbins of history. None of them works or has any predictive utility.
And I don't think it's because they were widely publicized so investors did away with the arbitrage by, e.g. bidding up SCV stocks or the more volatile high-beta stocks. They are all just useless.
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