Financial Risk Manager Part 2
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As a risk analyst evaluating an investment portfolio using the Fama-French three-factor model, assume you have obtained regression results that show statistically significant coefficients. How should you accurately interpret the following coefficients from your analysis: Alpha (0.10), Market (0.52), SMB (0.18), and HML (-0.70)?
As a risk analyst evaluating an investment portfolio using the Fama-French three-factor model, assume you have obtained regression results that show statistically significant coefficients. How should you accurately interpret the following coefficients from your analysis: Alpha (0.10), Market (0.52), SMB (0.18), and HML (-0.70)?
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A
There is a positive correlation between portfolio return and the size factor, which indicates that the portfolio moves together with large-cap stocks.
11.9%
B
There is a positive correlation between portfolio return and the value factor, which indicates that the portfolio moves together with growth stocks.
18.6%
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