The paper by Eugene F. Fama and Kenneth R. French examines the relationship between stock returns and various financial variables, including market beta, size, book-to-market equity, leverage, and earnings-price ratios. The authors find that while market beta has a weak or non-existent relationship with average returns, size and book-to-market equity play significant roles in explaining the cross-section of stock returns. Specifically, they find that: 1. **Market Beta**: There is no reliable relationship between average returns and market beta when variation in beta unrelated to size is allowed for. This contradicts the Sharpe-Lintner-Black (SLB) model, which predicts a positive relationship between beta and average returns. 2. **Size**: There is a strong negative relationship between average returns and firm size, with smaller stocks having higher average returns. 3. **Book-to-Market Equity**: There is a strong positive relationship between average returns and book-to-market equity, indicating that stocks with higher book-to-market ratios tend to have higher average returns. 4. **Leverage and Earnings-Price Ratios**: The combination of size and book-to-market equity absorbs the roles of leverage and earnings-price ratios in explaining average returns. The authors conclude that the Sharpe-Lintner-Black model, which posits a linear relationship between average returns and market beta, is not supported by their findings. Instead, they suggest that stock risks are multidimensional, with size and book-to-market equity capturing these dimensions. The results have implications for asset pricing models and the understanding of stock returns.The paper by Eugene F. Fama and Kenneth R. French examines the relationship between stock returns and various financial variables, including market beta, size, book-to-market equity, leverage, and earnings-price ratios. The authors find that while market beta has a weak or non-existent relationship with average returns, size and book-to-market equity play significant roles in explaining the cross-section of stock returns. Specifically, they find that: 1. **Market Beta**: There is no reliable relationship between average returns and market beta when variation in beta unrelated to size is allowed for. This contradicts the Sharpe-Lintner-Black (SLB) model, which predicts a positive relationship between beta and average returns. 2. **Size**: There is a strong negative relationship between average returns and firm size, with smaller stocks having higher average returns. 3. **Book-to-Market Equity**: There is a strong positive relationship between average returns and book-to-market equity, indicating that stocks with higher book-to-market ratios tend to have higher average returns. 4. **Leverage and Earnings-Price Ratios**: The combination of size and book-to-market equity absorbs the roles of leverage and earnings-price ratios in explaining average returns. The authors conclude that the Sharpe-Lintner-Black model, which posits a linear relationship between average returns and market beta, is not supported by their findings. Instead, they suggest that stock risks are multidimensional, with size and book-to-market equity capturing these dimensions. The results have implications for asset pricing models and the understanding of stock returns.