Author(s)

Wei Han

Corresponding Author

Wei Han

ABSTRACT

Numerous papers about multifactor models are proposed to explain the crosssection of expected returns. This paper provides an overview of existing multifactor models, particularly the Fama-French three-factor model and the five-factor model. Respectively, factor establishments, empirical strategy and results and comparison between two models will be fully included. The paper also critically discusses the deficiencies and provides potential improvements for these traditional models. Innovatively, this paper suggests that future research should concentrate more on the modifications of empirical tests on these models and, apart from that, potential factors for different kinds of securities require further exploration as well.

KEYWORDS

Multifactor models, development, critiques