On the Time-Series of Expected Portfolio Returns; Fama and French's (1993) Three-Factor Model

The exact specification of the three-factor model of Fama & French (1993) has eluded and defied even its own creators. Fama & French (1996) try to juxtapose the specification of their ad hoc model in the context of the ICAPM and APT framework. However, the evidence that has been produced is not sufficiently conclusive. In this paper, we derive an exact specification of the three-factor model of Fama & French (1993) irrespectively of the assumptions that underline the ICAPM and APT frameworks.