Question

Suppose the average return on T-Bills was 2%. The average factor risk premiums were the following:...

Suppose the average return on T-Bills was 2%. The average factor risk premiums were the

following:

• market (MKT): 6%

• size (SMB): 2%

• value (HML): 3%

1

We have the following information about three fund managers:

Manager              Average return,                % Market beta               SMB beta                  HML beta

Nancy                              15                                        1.1                              0.2                              -0.7

John                                 10                                        -0.5                             1.3                                0.3

David                                11                                         0.9                             0.1                              -1.1

What are the realized Fama-French three factor alphas for these managers?

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