Factor Analysis of a Low Market Beta Portfolio in the Nordics

Abstract: The return of publicly traded assets has been studied by both academia and commercial institutions, using models with different sets of factors. Building on the work of previous results in this field, such as the CAPM-model, the three-factor model by Fama and French, and the four-factor model by Carhart, this thesis studies the return of a low market beta portfolio in the Nordic stock market. This is done using multiple linear regression on different risk factors that take into account volatility, company size, book-to-market ratio, and momentum. The choice of factors represents different risks in the market. Results of the thesis find that half of the variation of returns is explained by the chosen model.