Multifactor Models

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This video discusses multifactor models for investing.

The Capital Asset Pricing Model shows the expected return of a security as a function of a single factor: systematic risk (measured by the security's beta). But systematic risk could be further decomposed into a number of different macroeconomic factors, such as inflation, interest rates, etc. A model that includes such factors is known as a multifactor model. The most famous multifactor models are the Fama-French three-factor model and the Fama-French-Carhart four-factor model.—
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