This paper tests whether the <link rid="b3">Campbell and Cochrane (1999)</link> habit utility model generates a valid stochastic discount factor for the 25 Fama-French size/book-to-market and size/momentum sorted portfolios. <link rid="b3">Campbell and Cochrane (1999)</link> derive a consumption based habit utility asset pricing model and...

We empirically test and compare the performance of the traditional capital asset pricing model (CAPM), the three-moment CAPM and the Fama-French (FF) three-factor model using the FF 25 portfolios data. Based on the time-series and the cross-sectional tests, the FF three-factor model outperforms...