What is 'High Minus Low  HML'
High minus low (HML) is one of three factors in the Fama and French asset pricing model. HML accounts for the spread in returns between value and growth stocks. HML argues that companies with high booktomarket ratios (value stocks) outperform those with low ones (growth stocks).
Also referred to as the "value premium".
BREAKING DOWN 'High Minus Low  HML'
Fama and French's Three Factor model is often used to evaluate a portfolio manager's returns. A typical measure of good management is large excess returns.
The model's three factors, including HML, attempt to explain excess returns in a manager's portfolio. Specifically, HML shows whether a manager was relying on the value premium (investing in stocks with high booktomarket ratios) to earn an abnormal return. If the manager was buying only value stocks, the model regression would show a positive relation to the HML factor, which explains that the portfolios returns are accredited only to the value premium. Because the model can explain more of the portfolio's return, the original excess return of the manager decreases.

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