Question

Which of the following factors, if any, were excluded by Carhart, from the four factor model?

Group of answer choices

Excess return of high book-to-market stocks over low book-to-market stocks

Excess return on stocks with recent high returns over stocks with recent low returns

Excess return of small stocks over large stocks

Excess returns on high ROE stocks over low ROE stocks.

Excess return on the market index over the risk free asset.

Answer 1

carhart four factor model consider four factors listed below:-

Excess return of high book-to-market stocks over low book-to-market stocks

Excess return on stocks with recent high returns over stocks with recent low returns

Excess return of small stocks over large stocks

Excess return on the market index over the risk free asset.

but here the question is which of the following is not that factor that means answer is Excess returns on high ROE stocks over low ROE stocks.