Comparisons were necessarily difficult, and managers would each stress the time frames in which their own approach excelled. Investors could hardly be blamed if they didn't find solid guidance from Wall Street's competing gurus. The truth is, all the gurus were just blowing smoke. A Modest Proposal Two University of Chicago professors, Eugene Fama and Kenneth French, found an elegant way to help resolve the above problem. While the results are surprising, their arguments are compelling.
Beta is a measure of the volatility of the individual stock in relation to the market as a whole.
CAP-M. It was elegant and relatively easy to understand and explain. Beta is a single-factor variable. Fama and French tried a number of other factors in combination to see if they could provide a better fit. BTM is the ratio of a firm's book value per share to its stock price. This alternative figure was created out of necessity, because book value may sometimes be zero, and a ratio with zero on the bottom is impossible to use in calculations.