“If assets are priced rationally, variables that are related to average returns, such as size and book-to-market equity, must proxy for sensitivity to common (shared and thus undiversifiable) risk factors in returns. The time-series regressions give direct evidence on this issue. In particular, the slopes and R2 values show whether mimicking portfolios for risk factors related to size and [book-to-market] capture shared variation in stock and bond returns not explained by other factors.”

— Eugene Fama

Source: Common risk factors in the returns on stocks and bonds, 1993, p. 4-5

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Eugene Fama 6

American economist and Nobel laureate in Economics 1939

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