Wednesday, August 26, 2020

Scarlet Letter Analysis free essay sample

Kelsey Federspill Scarlet Letter Literary Analysis R5 12. 2. 12 Over Coming Guilt Remorse is an inclination experienced subsequent to submitting a demonstration that creates a feeling of blame. An actual existence exercise can be learned in Nathaniel Hawthorne’s epic, The Scarlet Letter, about the subject of blame. Everybody encounters blame when they submit a wrongdoing or human fragility however the way one handles the sentiments of blame is extraordinary. Blame is communicated in three primary manners: disregarding or concealing the wrongdoing and letting the blame develop within, censuring others for the transgression and needing vengeance for the manner in which the individual feels, and grasping the wrongdoing submitted and not discharging the blame. The various ways blame is experienced decides the manner in which it is rebuffed: by others or nobody by any means. However, discipline for the transgression doesnt consistently influence the measure of blame felt by one. Hawthorne utilizes imagery and incongruity to exhibit that blame ought not take over one’s life, rather it ought to be an exercise educated of embracement, absolution, and acknowledgment. We will compose a custom paper test on Red Letter Analysis or on the other hand any comparable subject explicitly for you Don't WasteYour Time Recruit WRITER Just 13.90/page In The Scarlet Letter, the character Hester Prynne is notable for the red letter that she had to wear. Prynne grasped the discipline of the red letter and utilized the discipline in a special manner, â€Å"On the bosom of her outfit in fine red material, encompassed with an intricate weaving and awesome twists of gold string, showed up the letter A† (37). The letter ‘A’ spoke to the wrongdoing of infidelity that Prynne had submitted. The people group pick this type of discipline for Prynne to cause her to feel liable for the demonstration of infidelity she submitted and utilized it for instance to the remainder of the network. As Prynne departures from jail Hawthorne portrays the scene, â€Å"the scene was not without a blend of stunningness, for example, should consistently contribute the display of blame and disgrace in an individual creature† (39). Prynne decides to grasp the red letter instead of let the sentiment of blame assume control over her life since she wanted to set a genuine model for her little girl, Pearl. She had the option to grasp her transgression and the red letter since she was attempting to set a model for her little girl. It was unexpected how the network attempted to constrain coerce on to Prynne, however consequently she grasped the discipline in full step and even utilized it to filter herself, â€Å"Here, she said to herself, had been the location of her blame, and her ought to be the area of her discipline; thus, perchance, the torment of her day by day disgrace would finally cleanse her spirit, and work out another immaculateness than that which she had lost; more holy person like, in light of the fact that the consequence of martyrdom† (55). At the point when the town individuals saw Prynne as she left the jail, individuals stated, â€Å"thus she will be a living lesson against sin† (44). The town individuals would consistently be helped to remember her transgression. Prynne didn't let the blame of her transgression produce a significant effect on her life. Or maybe she acknowledged her offense and scholarly the significance of not letting her past slip-ups and coerce contrarily influence her future. Rosebushes are loaded with magnificence however torment can be exacted on somebody who attempts to hold it because of the rosebush’s sharp thistles. At the point when Hawthorne delineates the town he portrays the rosebush on the jail, â€Å"but, on one side of the entry, and established nearly at the limit, was a wild rosebush, secured, in this period of June, with its sensitive jewels, which may be envisioned to offer their aroma and delicate magnificence to the detainee as he went in, and to the denounced criminal as he approached to his fate, in token that the profound heart of nature could feel sorry for and be benevolent to him† (33). The rosebush represents pardoning from blame all through The Scarlet Letter. Pearl, Prynne’s little girl, was visiting the governor’s corridor with her mom one day to convey a couple of weave gloves Prynne had made. While at the governor’s house, Pearl saw a rosebush and responded in an uncommon manner, â€Å"Pearl, seeing the rosebushes, started to sob for a red rose, and would not be pacified,† (73). Pearl reacted with this emergency since she needed pardoning for her mom and for her dad, Reverend Dimmesdale, to be acknowledged by the network. Pearl felt remorseful yet accused others. She was looking for retribution on the townspeople for the manner in which they caused her mom to feel. The incongruity of the rosebush is the way it hurt Prynne, Pearl, and Dimmesdale, similar to the thistles on a rosebush when contacted. At long last the family moved out of their locale endeavoring to not let the errors of the past assume control over their current lives. Eventually, they pick a new beginning. Pearl was a result of Prynne’s sin of infidelity. Pearl’s birth was embarrassing for Prynne; by the by Pearl despite everything meant everything to Prynne. Pearl’s name even has centrality, â€Å"but she names the baby ‘Pearl,’ as being of extraordinary cost, bought with all she had, her mother’s just treasure† (61). The scriptural mention to the pearl is alluded to in Matthew 13 about an illustration of a man who quit any pretense of everything at a pearl of extraordinary cost. Prynne quit any pretense of all that she had for her little girl. She even dresses Pearl in the best garments, while she dresses inadequately. To Prynne, Pearl was an image of solidarity and beating hindrances. Prynne stated, â€Å"I can train my little Pearl what I have gained from this [the red letter],† (76). Prynne is an extraordinary model and life exercise to Pearl of how to acknowledge the slip-ups made before and not let the disgrace characterize oneself. Prynne utilizes Pearl to show how extreme a small kid can be. Then again, the town saw Pearl as the villain youngster: abhorrent. The town examined Pearl as, â€Å"an pixie of abhorrence, symbol and result of sin,† (64) and, â€Å"poor little Pearl was an evil presence offspring,† (68). Pearl herself is genuinely an image of numbness and expectation. Hawthorne depicted an event of Pearl conversing with Mr. Wilson, a minister, â€Å"after placing her finger in her mouth, with numerous ungracious refusals to answer great Mr. Wilson’s question, the youngster at long last declared that she had not been made by any means, yet had been culled by her mom off the rosebush of wild roses, that developed by the prison,† (76). Pearl accepted she was made for acceptable and had an idealistic disposition on life. She didn't let blame become a feeling known in her. Pearl didn't let the past impact her future. Taking everything into account, life exercises were found out about embracement, pardoning, and acknowledgment from blame with the utilization of imagery and incongruity from Hawthorne in The Scarlet Letter. The various ways blame can be taken care of was exhibited in The Scarlet Letter, yet not letting blame take over one’s life was critical. Proceeding onward and gaining from a wrongdoing or human delicacy is noteworthy and something everybody can gain from.

Saturday, August 22, 2020

The Cowboy Phenomenon Essay Example | Topics and Well Written Essays - 750 words

The Cowboy Phenomenon - Essay Example At long last, the rancher is forceful on the grounds that nothing can prevent him from accomplishing any objective he wishes to accomplish (Ruud, Geoff and Hugo 156). â€Å"There are a few things a man just can’t flee from† The principal normal for the rancher includes certain parts of his lives that are compulsory. Thusly, the cowpoke must play out these capacities since he has no different choices. The capacities could even be hazardous to the cowboy’s presence. Be that as it may, the cattle rustler plays out the capacities to fulfill huge desires throughout his life. For instance, in Johnny Guitar†, Johnny understands that he is enamored with Vienna. This affection for Vienna empowers the watchers to experience the main rancher normal for Johnny Guitar. This is on the grounds that Johnny Guitar keeps up Vienna’s organization after oneself proclaimed transformed. Guitar thinks about Vienna’s conceivable association in the burglary due to cri minal history, which Vienna as of now has. Be that as it may, this doesn't prevent Johnny Guitar from sparing his adoration, Vienna. Johnny Guitar knows that it is an extraordinary hazard to spare Vienna after her catch yet the affection he has moves him (Ray). Thus, Charles Cosby shows comparative cattle rustler qualities in â€Å"Cocaine Cowboys 2†. The main distinction is that Cosby’s motivation is the desire to be effective in the cocaine business, not love. Cosby has excellent boldness, which empowers him to compose letters to Blanco. Obviously, Griselda Blanco is a sovereign pin who the vast majority dread. Consequently, Cosby’s choice to compose the letter to Blanco is equivalent with the primary trait of the cattle rustler. This is on the grounds that Cosby dreams of additionally driving the cocaine business. Later he sets up the cocaine business and is a rich man since he was not hesitant to move toward the adoptive parent (Corben and Perry). â€Å"A m an should do what he believes is right† The second quality of the cowhand urges cattle rustlers to do what they believe is correct paying little mind to different people’s sees. Johnny Guitar assists Vienna with excursion of the consuming bar without considering if Vienna was correct or wrong. Johnny Guitar accepts that men should ensure the individual ladies who they love. Consequently, he spares Vienna from all difficulties that face her like when Emma persuades the men to slaughter Vienna. Likewise, Cosby takes part in certain conduct that individuals would somehow or another think about improper. For instance, he sells cocaine in the city without thinking about the threats, which he postures to individuals. Cosby is similarly mindful of the outcomes of the cocaine business. He chances serving prison time like Blanca or in any event, confronting more disciplines that are not kidding. Be that as it may, this information doesn't prevent Cosby from taking part in the pe rilous medication business. His solitary concern is to be effective with the medications, which he understands when he possesses the 40 Million-cocaine business (Ray). â€Å"If everything isn’t highly contrasting, I state â€Å"why the hellfire not?† Finally, the cattle rustler is forceful in all that he does in light of what Johnny Guitar and Charles Cosby uncover in their particular circumstances. For example, Johnny Guitar guarantees that he spares Vienna when Emma proposes slaughtering Vienna. It is among the most perilous choices he makes in the whole film. This is a result of Vienna’s past and the displeasure, which Emma and her posse have for Vienna. Clearly, Emma would likewise slaughter any individual who was on Vienna’s side. Nonetheless, that couldn't keep Johnny Guitar from confronting the furious

Tuesday, August 18, 2020

The Definitive Guide to Fama-French Three-Factor Model

The Definitive Guide to Fama-French Three-Factor Model If youre an investor, financial analyst or a financial manager, by now, youve definitely heard of the Fama-French three-factor model.But just because you heard about it, doesnt mean that you understand it, what its used for and how to use it yourself.And that is why were here!In short, this model describes stock returns, which is one of the most important factors investors take into consideration when choosing which project, product or company is worth their time and money.But, I’m not going to lie; the Fama-French model is a tricky business.So, today, we will cover everything you need to know, including:What is the Fama-French three-factor model?Why is it so important?How was it created?How is it calculated?What is it used for?What other types of models exist?We will cover all the details and yet explain everything as simple as possible.Turn off the WIFI on your phone, grab a cup of coffee, grab a pen and paper and prepare to learn!Buckle up!THE IMPORTANCE OF PAYING ATTENTION TO S TOCK RETURNSSince the Fama-French three-factor model is one of the most known tools to describe stock returns, first, we will shortly cover why this subject is important.You probably know from the movies that many investors out there focus on prices of stocks that are changing over time. They compare the movement of the prices from time to time.However, this is a common mistake, and heres why.Stocks usually pay out in dividends distribution of reward that is a part of the companies’ earnings to their respective shareholders.They are managed by the companies’ board of directors and can be issued as stock, shares, cash or in other ways, while cash dividends are the most common option.Funds, as well as companies, are often known for paying out dividends to their trusted shareholders.To get a clear picture of how stocks perform over a period of time, we should take into consideration capital gains as well as dividends.This is very useful when it comes to evaluating stocks and compa ring investment results when stocks are held for different periods of time.WHAT WAS THERE BEFORE THE FAMA-FRENCH THREE-FACTOR MODEL?This model is actually an extension to a model which existed before the CAPM (Capital Asset Pricing Model).CAPM is a one-factor model, and it explains the portfolios returns with the amount of risk it contains, according to the market.Basically, CAPM explains portfolio performance primarily using the performance of the market as a whole.The Capital Asset Pricing ModelCAPM describes the relationship between expected return in stocks and systematic risk.This is the first model of this kind. It is widely known and used for pricing risky securities and generating expected returns for assets, based on the risk and cost of capital.The following formula is used to calculate it:ERi  = Rf  + ßi*(ERm   Rf)where:ERi= Expected return of investmentRf= Risk-free rate (time value of money)ßi= Beta of the investment (a measure of risk)ERm= Expected return of the mar ket(ERm Rf) = Market risk premiumLogically, investors want to have compensation for the risk and the time value of money, which is represented by the risk-free rate.The other parts of the equation are there to address all additional risks the investor is facing.The beta of the investment measures the amount of risk the investment adds to the portfolio which resembles the market.If the Beta is greater than one, the stock is riskier than the market itself.If the Beta is equal to less than one, the formula will assume that the risk of a portfolio will be reduced.The Market risk premium is the return expected from the market. The stocks Beta is multiplied by the Market risk premium, and the result gives the manager or investor a required return which can be later used to figure out the value of the asset.So, whats the main point?The main goal of the CAPM formula is to determine if the stock is valued as it should be.The question CAPM answers is: is the value of the stock good when its e xpected return is compared to the risk and time value of money?Disadvantages of CAPMCAPM has been proven not to be so reliable in practice.None the less, it is still widely used because of its simplicity. It is still one of the easiest tools to compare alternatives when investing.But, one of the problems that this model has is that, when we include the Beta in the formula, we are assuming that the risk can be completely measured by a stocks price volatility. But, moving the price in two different directions is not equally risky.CAPM also assumes that the Risk-free rate stays the same during the period of discounting.In real life, holding periods last for more than 10 years, so its highly unlikely that this rate stays the same for that entire period.When the Risk-free rate is increased, the stock can end up being overvalued because the cost of capital has increased as well.Finally, the biggest concern regarding CAPM is that future cash flows can be estimated for the process of discou nting.If this was the case, an investor or a manager could estimate the stock return value precisely, and then there would be no need for CAPM at all.Unfortunately, CAPM wasnt flexible enough it used only one variable to describe stock returns. It also didnt take into consideration situations with outperformance.CREATION OF THE FAMA-FRENCH THREE-FACTOR MODELSo, professors Fama and French created a new one, with two extra risk factors.Therefore, making it a better tool for performance evaluation.To the original factor, which is the market risk factor, two more were added.These two (SMB and HML) were added because of their consistent contribution to portfolio performance.Nowadays, it is very popular as a measurement for portfolio performance and for predicting future stock returns.Even today, there is a lot of debate about the outperformance tendency:Does it happen because of market efficiency?Or does it happen because of market inefficiency?To support the first theory, it is stated that outperformance happens because of the excess risk which value stocks and small-cap stocks.This excess risk is the result of a higher cost of capital and greater business risk.Supporters of the second statement explain the outperformance with incorrect pricing of the value of companies by market participants. Long-term, with value adjusts, this leads to the excess return.WHAT IS THE FAMA-FRENCH THREE-FACTOR MODEL?This is the way of thinking on which the Fama-French model is based on:Small-cap high-value companies usually do better than the overall marketHigher investments usually lead to bigger and better returnsValue companies outperform growth companiesProfessors Eugene Fama and Kenneth French, who were professors at the University of Chicago Booth School of Business, designed this model back in the 1990s to describe stock returns in portfolio management and asset pricing.The Fama-French three-factor model (in future uses the Fama-French model) pays attention to three major f actors:Market riskCompany size Outperformance of small vs big companiesValue factors Outperformance of high book/market vs small book/market companiesOne of the scientists, Eugene Fama, shared the Nobel Memorial Prize in Economic Sciences. This shows just how appreciated this professor is in the field of economics and how valued his work is.His contribution to the Fama-French model led to it being widely used by investors and financial managers today to help with making important decisions.This model is basically the result of an econometric regression of historical stock prices.Its based on the assumption that the riskier environment, the higher the compensation should be, which should lead to bigger earnings potential.An interesting fact is that the model was originally designed for just 4 countries:CanadaUnited States of AmericaUnited KingdomJapanOf course, local factors lead to better results and conclusion than global factors, because they better explain the variation of time series in stock returns.So, with a few adjustments and with updated risk factors, the model also became useful for Asia, Europe and other regions.FORMULAAll of this seems rational, but how do I put it to use?Well, when we talk about the Fama-French model, in order to describe stock returns, our final goal is to calculate the portfolios expected rate of return.This is done with the following formula:Portfolios Expected Rate of Return = Risk-free Rate + Market Risk Premium + SMB + HMLor:r  = rf + ß1*(rm  â€" rf) + ß2*(SMB) + ß3*(HML) + ?  where:r  = Portfolios Expected Rate of Returnrf  = Riskfree Return Rateß1,2,3  = Factor’s Coefficient originally there was just 1, now there are 3 of them. This is the main innovation in the Fama-French model.(rm  â€" rf)  =  Market Risk PremiumSMB(Small Minus Big)  = Historic excess returns of small-cap companies over large-cap companiesHML(High Minus Low)  = Historic excess returns of value stocks* over growth stocks**?= Risk*Value stocks a re stocks which have a high book to price ratio**Growth stock are stocks which have a low book to price ratioThe historic excess values can be found for free on Kenneth Frenchs website.March 2019Last 3 MonthsLast 12 MonthsFama/French 3 Research FactorsRm-Rf SMB HML1.10 -3.15 -4.0813.38 1.73 -8.366.43 -3.57 -15.44Fama/French 5 Research Factors (23)Rm-Rf SMB HML RMW CMA1.10 -3.56 -4.08 0.91 -1.0113.38 1.02 -8.36 0.55 -4.256.43 -5.81 -15.44 -0.58 -0.20Fama/French Research PortfoliosSize and Book-to-Market PortfoliosSmall Value Small Neutral Small GrowthBig Value Big Neutral Big Growth-4.34 -2.87 -0.63-1.62 0.42 2.829.86 12.77 19.378.41 12.77 15.62-3.75 0.70 8.70-4.64 7.20 13.80Size and Operating Profitability PortfoliosSmall Robust Small Neutral Small WeakBig Robust Big Neutral Big Weak-2.81 -3.83 -1.392.64 0.92 -0.6014.79 11.67 15.8814.59 13.39 12.40-5.90 1.16 5.4813.18 5.80 2.96Size and Investment PortfoliosSmall Conservative Small Neutral Small AggressiveBig Conservative Big Neutral Big Aggressive-1.84 -3.30 -2.310.71 0.27 3.2013.74 11.19 17.1811.08 12.89 16.133.60 1.96 0.678.78 5.77 12.11Calculation of the Fama-French three-factor model is commonly done in software programs capable of handling big data. Excel is one of the most popular ones out there. Remember, this is a three-factor model. To best explain it further, lets look at each factor one by one.1. Market Risk PremiumWhat does this part of the formula mean?(rm  â€" rf)The market risk premium basically represents the difference between the expected return of the market and the risk-free return rate. It gives the investor returns above the risk-free rate.2. Small minus big market capitalization (SMB)This factor is commonly known as the small firm effect. or the size effect, where size is determined by the companys market capitalization. It represents a historic excess of small-cap companies over large-cap companies.A side effect which is based on the market capitalization of a company is SMB. Its factor s coefficient is calculated via linear regression, and it can have negative and positive values.Again, the logic behind the Fama-French model is that higher returns come from small-cap companies, rather than large-cap companies.3. High minus low book-to-market ratios (HML)HML is used to show the spread in returns between companies which have high and companies which have a low book to market ratios (value companies and growth companies).Its factors coefficient is also calculated using linear regression, and it can have a negative as well as a positive value.This third factor shows that in the long run, growth companies have lower returns than value companies. This is why they are at the second place in the formula.The HML factor is used to evaluate profit margins, short-term and long-term. It states the anticipated performance of security in the future. In the formula high minus low, we calculate the associated range.Using HML we can see if a manager is relying on the value premium to earn an abnormal return, by investing in stocks with high book-to-market ratios.If this is the case, then a positive relation to the HML factor is shown.This explains why the portfolios returns are accredited only to the value premium. The original excess of the manager will decrease because the model is able to explain more of the portfolios return.Its not officially stated by the creators, Fama and French, why book-to-price ratios measure risk.However, there are theories that have been mentioned. If a stock has a high book-to-price ratio, it could mean that the stock is distressed.This means that its not likely for future earnings to happen and that is the reason why the stock is selling low.It could also mean that the stock capital is intensive. Intensive stock capital happens when stocks are more vulnerable to low earnings during slow times in economics.What would happen if a firm which isnt capital intensive were to become distressed?This is one of the questions these theori es do not answer. They both make sense, but when you think about them, they explain completely different situations.There is a third theory which states that the broad market index weighs stocks in accordance to the market capitalization. This makes it biased to size and blind for valuation.This leads to thinking that the added two factors in this model are just a couple of tweaks, which address these problems.This is the reason why momentum was added as another factor, to show where capitalization has been putting their money lately, instead of showing where it has been put for years, like the market capitalization factor shows.Momentum was later added as a factor to a different version of the Fama-French model, but we will cover more on that later in the article.USES OF THE MODELAll of this is fine to me, but how do I put in practice what Ive learned here?Well, weve established that when we look long-term, small companies have a tendency to outperform large companies. Also, value companies do better than growth ones.Fama and French studied the model further and found that it can explain the majority of diversified portfolio returns.It explains a whole 90% of it to be exact, where the original CAPM described just 70% of diversified portfolio returns. Source: corporatefinanceinstitute.comIm an investor, how do I use this model?Fama and French insist that investors must be ready to handle extra periodic underperformance and short-term volatility that can happen in a short period of time.To put it bluntly if you are investing for 10 or more years, you will be rewarded in the long run for your periodic losses in the short run.When you combine size and value factors with their beta factors, they explain about 90% of the return in your diversified stock portfolio.This was proven when Fama and French ran their studies with thousands of random stock portfolio to test their model.With this model, you as an investor can construct a portfolio where you can see the average expected return, all according to the relative risks youve assumed.The main factors which drive the expected returns are:market sensitivitysize sensitivityvalue stocks sensitivity, measured by the book to market ratioIf any additional average expected return occurs, it is attributed to unsystematic or unpriced risk.Using the model, it is possible to separate the skill of the investor from the higher returns.If the three factors can completely explain the portfolios performance, what is the manager doing?The high returns didnt happen because of his or her abilities or skills.Well, the manager should contribute to good performance by picking good stocks. Unfortunately, there isnt a formula yet which makes decisions for you perfectly. Making good decisions is still a skill only people possess.A lot of studies in emerging markets were conducted to see how the model would handle in that territory.The High Minus Low book-to-market ratio still explains everything it should very well.Unfortunately, the same cant be said for the market value of equity factor. This is why a fresh three-factor model was introduced by Foye, Mramor and Pahor in 2013.They replaced the market value of equity factor with a more useable one.DIFFERENT FAMA-FRENCH MODELSThe Fama-Frenc h model has gone through changes over time. Now, there are also the four-factor and the five-factor versions of the model, which require more information to calculate but give more detailed results.1. The Four-Factor modelThis is an extension to the regular three-factor model, created by Mark Carhart. It adds the momentum factor for asset pricing of stock, commonly also known as the MOM factor (monthly momentum).What does momentum mean?Momentum in a stock is when the stock price is rising, and it has a tendency to keep rising. Same goes for the other way around if the stock price is declining, momentum means it will keep going down.Monthly momentum is the difference between the equal weighted average of the lowest performing companies and the equal-weighted average of the highest performing ones, lagging one month.If a stocks average of returns for the past 12 months is positive, we say that the stock is showing momentum.The four-factor model is actively used as a model for managem ent and mutual fund evaluation.Momentum strategies are still very much used in financial markets where financial analysts give buy or sell recommendations based on the yearly price high/low.2. The Five-Factor modelBack in 2014, two more factors were added to the original Fama-French model profitability and investment.The first being a simple difference between the returns of companies with high and low operating profitability, while the investment factor is the difference between the returns of companies which invest conservatively and those which invest aggressively.The fourth factor, profitability, suggests that firms which report higher earnings in the future have higher returns in the stock market.Investment is the fifth factor, and it is closely related to the concept of internal investments and returns. It suggests that companies which direct their profit to big growth projects are more likely to experience losses in the stock market.It is found that the CAPM and the three-fa ctor models, in some cases, dont explain properly cross-sectional variations in portfolio returns.In cases like these, the five-factor model is a much better choice for a tool for evaluation.KEY TAKEAWAYSThe three factors are market risk, company size (SMB) and value factors (HML).The Fama-French model is an extension to the one-factor Capital Asset Pricing Model (CAPM). A new model was created because CAPM isnt flexible and doesnt take into consideration overperformance.Value companies do better on the market than the growing companies.The bigger and riskier the investment, the higher the payoff should be.Local factors explain better than global factors the variations in time series in stock returns.We use the Fama-French model to calculate the Portfolios Expected Rate of Return.No matter how precisely this model describes the stock returns, it is up to the managers or investors to choose where it would be good to invest.The four-factor model adds the momentum factor, which describ es where the value of the stock will be based on the value trends.The five-factor model takes into consideration two extra factors profitability and investment.FINAL THOUGHTSAnalyzing the past is useful to learn from those experiences and drive conclusions from them.However, investing in the future is even more important.By investing we are giving up short-term gains in the hopes of gaining long-term gains.That hope can be slim, and it can also be very big and reliable.By calculating our risks and making our decisions based on the calculations, we improve our chances of gaining.Every day, decisions for the companys future are made by the investors and the companys management.Should we do this new project?Should we invest in this other company?Should we invest in this?All of these questions are hard to answer. The right investment will lead to a positive outcome for the company, while the wrong decision will lead to failure.The pressure to make this kind of decision is huge.Luckily, there are some tools that help us make the right decision.The Fama-French three-factor model is one of the well-known tools, managers and financial experts or analysts use to calculate whether an investment is worth the time and the money or not. It takes into consideration three factors which best describe the stock return value.Before you go on to decide your next big investment move, be sure to use this tool to up your chances of success.Hopefully, with this article, youve understood all the ins and outs of the Fama-French model, and you are now ready to use it!We hope that by next time we see each other, youll have already seen the payoff of your smart investments! Remember good luck favors well-calculated risks!