Investors are always seeking to unravel the drivers that underlie equity price and stock performance. Several models have been developed over time trying to solve the puzzle. The Capital Asset Pricing Model (CAPM) published by Sharpe (1964) and Lintner (1965), and the Fama-French Model have offered investors a theoretical framework for comprehending the relationship between risk and expected return in financial markets. However, investors have observed anomalies that cannot be explained by factors in these models. In this study, Long Chen, Robert Novy-Marx, and Lu Zhang present an alternative three-factor model that includes the market factor, an investment factor, and a return-on-equity factor to estimate excess returns in practice. The study employs calendar-time factor regressions on samples spanning from January 1972 to December 2010 to examine its validity. The new factor model is compared with the CAPM and Fama-French models across a diverse range of testing portfolios. The study’s findings suggest that the new model is practically significant as it can be employed to generate expected returns in real-world scenarios.