Answer-first summary for fast verification
Answer: The Carhart four-factor model, an extension of the Fama-French model that includes momentum as an additional factor.
The correct answer is **B** because the Carhart four-factor model extends the Fama-French three-factor model by incorporating momentum as an additional factor. This model is widely recognized for its practical application in explaining asset returns. - **Option A** is incorrect because fundamental factor models focus on company-specific metrics rather than momentum. - **Option C** is incorrect because the Fama-French three-factor model initially excluded momentum, which was later added by Carhart.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
No comments yet.
Momentum, characterized by historical stock performance, is most likely incorporated in which of the following models?
A
Fundamental factor models, which evaluate relationships between security returns and underlying company fundamentals such as earnings, cash flow, and investments.
B
The Carhart four-factor model, an extension of the Fama-French model that includes momentum as an additional factor.
C
The Fama-French three-factor model, which originally included factors like size and book-to-market value but did not account for momentum.