This literature review paper aims to provide an overview of the Capital Asset Pricing Model (CAPM), Fama-French Three Factor Model, and Carhart Four Factor Model. The paper examines the development, assumptions, and limitations of each model, as well as empirical tests and applications in finance research. The CAPM is a model commonly utilized in finance to elucidate the correlation between expected returns and risk for an individual asset or portfolio. The Fama-French Three Factor Model expands on the CAPM by introducing additional risk factors, such as company size and book-to-market ratio. The Carhart Four Factor Model expands on the Fama-French model by incorporating momentum as a risk factor. In addition, the article examines the debates and criticisms surrounding each model, including their inability to account for all risk factors and the suppositions made about market efficiency. Lastly, the paper emphasizes the practical applications of these models in asset pricing, portfolio management, and financial decision-making. The ultimate objective of this literature review is to provide a comprehensive understanding of these asset pricing models, their advantages and disadvantages, and their importance in present-day finance research.

stock market ,excess returns,Carhart´s four-factor model,Fama and French three-factor model, Capital Asset Pricing Model (CAPM), portfolio returns.