Question

Fama-French Three-Factor Model An analyst has modeled the stock of a company using a Fama-French three-factor...

Fama-French Three-Factor Model An analyst has modeled the stock of a company using a Fama-French three-factor model. The risk-free rate is 5%, the market return is 12%, the return on the SMB portfolio (rSMB) is 2.3%, and the return on the HML portfolio (rHML) is 5.5%. If ai = 0, bi = 1.2, ci = - 0.4, and di = 1.3, what is the stock's predicted return? Round your answer to two decimal places. %

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Fama-French Three-Factor Model An analyst has modeled the stock of a company using the Fama-French three-factor...
Fama-French Three-Factor Model An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 11%, the return on the SMB portfolio (rSMB) is 3.4%, and the return on the HML portfolio (rHML) is 5.6%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's predicted return? Do not round intermediate calculations. Round your answer to two decimal places. =
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free...
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the market return is 9%, the return on the SMB portfolio is 3.2%, and the return on the HML portfolio is 4.8%. If a = 0, b = 1.1, c = -0.3, and d=1.2, what is the stock’s predicted return ? Please show your solution step by step.
a. An analyst has modeled XYZ stock using the Fama & French three factor model (FF3FM)....
a. An analyst has modeled XYZ stock using the Fama & French three factor model (FF3FM). Over the past few years the risk premium on SMB was 2.75% and the risk premium on HML was 3.95%. Regression analysis shows that XYZ’s beta coefficient on SMB is 2.25 and on HML is -2.25. If the risk–free rate is 3.25%, the market risk premium is 7.50%, and XYZ’s market beta is 1.80, what is a fair rate of return on XYZ according...
1. Your investment club has only two stocks in its portfolio. $30,000 is invested in a...
1. Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock with a beta of 0.5, and $45,000 is invested in a stock with a beta of 1.8. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places. 2. AA Corporation's stock has a beta of 0.8. The risk-free rate is 3%, and the expected return on the market is 11%. What is the required rate of...
Explain the Fama-French Three-Factor Model. Compare the APT with the CAPM
Explain the Fama-French Three-Factor Model. Compare the APT with the CAPM
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?
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% 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?
Compare and contrast the Capital Asset Pricing Model and the Fama-French three-factor asset pricing models. Be...
Compare and contrast the Capital Asset Pricing Model and the Fama-French three-factor asset pricing models. Be sure to include the similarities, the differences, and why each could be considered superior to the other. Conclude by explaining which you feel is a more effective way to assess if a specific security (or set of securities) is fairly valued.
1. Compare and contrast the Capital Asset Pricing Model and the Fama-French three-factor asset pricing models....
1. Compare and contrast the Capital Asset Pricing Model and the Fama-French three-factor asset pricing models. Be sure to include the similarities, the differences, and why each could be considered superior to the other. Conclude by explaining which you feel is a more effective way to assess if a specific security (or set of securities) is fairly valued.
The following table shows the sensitivity of four stocks to the three Fama−French factors. Assume that...
The following table shows the sensitivity of four stocks to the three Fama−French factors. Assume that the interest rate is 2%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.7%, and the expected risk premium on the book-to-market factor is 4.9%. Boeing Johnson & Johnson Dow Chemical Google Market 1.21 0.60 1.71 1.46 Size −0.81 −0.18   0.31 −0.44 Book-to-market 0.47 −0.10 1.70 −1.25 Calculate the expected return on each stock....