You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:


Log in to your personal account or through your institution.

Risk, Return, and Equilibrium: Empirical Tests

Eugene F. Fama and James D. MacBeth
Journal of Political Economy
Vol. 81, No. 3 (May - Jun., 1973), pp. 607-636
Stable URL:
Page Count: 30
Subjects: Economics Business
  • Download PDF
  • Add to My Lists
  • Cite this Item
Risk, Return, and Equilibrium: Empirical Tests
We're having trouble loading this content. Download PDF instead.


This paper tests the relationship between average return and risk for New York Stock Exchange common stocks. The theoretical basis of the tests is the "two-parameter" portfolio model and models of market equilibrium derived from the two-parameter portfolio model. We cannot reject the hypothesis of these models that the pricing of common stocks reflects the attempts of risk-averse investors to hold portfolios that are "efficient" in terms of expected value and dispersion of return. Moreover, the observed "fair game" properties of the coefficients and residuals of the risk-return regressions are consistent with an "efficient capital market"--that is, a market where prices of securities