Fama–French three-factor model

The Fama-French Three-Factor Model is a model used in finance that looks at the relationships between stock returns and three different factors. Those factors are Market Risk (often called "Beta"), Size Risk and Value Risk. Market Risk looks at how much the price of a stock is tied to how well the stock market, as a whole, is doing. Size Risk looks at how much a stock's price is tied to how big the company is (smaller companies often have higher returns, while larger companies have steadier returns). Value Risk looks at how much a stock's price is tied to how much investors think it's worth relative to its price (stocks that are a good value often have higher returns). The Fama-French Three-Factor Model is a way of looking at the relationship between these three factors and the returns on stocks so that better stock decisions can be made.