enter image description here So i've run a regression for a stock and these are the results. I was wondering if I'm right in inferring that because the SMB coefficient is negative, this particular stock I've chosen has a large cap, whilst the HML of 0.35 indicates that the stock is in fact a value stock with a high book-market ratio, since a growth stock would have a coefficient of 0 for HML loading?



1 Answer 1


Your interpretation is correct.

SMB - size premium - suggest that smaller companies outperform larger companies.

HML - value premium - suggest that value stocks outperform growth stocks.

Negative loading for SMB indicates that the stock in question is in the large cap category.

Positive loading for HML indicates that the stock offers value exposure.

However, note that a negative and statistically significant HML loading that would mean that it is a growth stock and not 0.

Your adj R squared is very low, so I am not sure if the coefficient can be used for inference. These factor models are typically used on portfolios (such as mutual funds) rather than stocks.

Also I would recommend using Carhart 4 factor model which include momentum as a factor.

Best regards


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