Carhart's four-factor model adds momentum as the fourth factor
Image: Bill Holler, CC BY-SA 2.0, via Wikimedia Commons
Carhart four-factor model
Carhart's four-factor model adds momentum as the fourth factor
Carhart's four-factor model expands on the Fama-French three-factor model by including momentum as an additional factor. Momentum refers to the speed or velocity of price changes in a stock.
Example
A stock showing consistent upward momentum may outperform others as predicted by Carhart's model.
Remember this
Understanding Carhart's model helps investors identify stocks with strong momentum, potentially leading to better investment decisions.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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Educational content, not financial advice.
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