$2.$ Farma$-$French $3$factor model

Consider the following Fama$-$French $3$factor model:

R$$Rfree$=$$+$b$1($RM$$Rfree$)+$b$2($SMB$)+$b$3($HML$)+$R$$Rfree$=+$b$1$RM$$Rfree$+$b$2$SMB$+$b$3$HML$+$

Where $($RM$$Rfree$)$RM$$Rfree$$represents CAPM excess market portfolio returns, SMBSMB$$is $$small minus big$,$ and HMLHML$$is $$high minus low$.$ $$represents the error term.

HMLHML$$is intended to capture the affect of $$on excess returns.