Financial Risk Manager Part 2
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A risk analyst is evaluating an investment portfolio using the Fama-French three-factor model. The analyst regresses thirty years of weekly portfolio returns against the three factors of the model. The analyst obtains the following regression results:
| Alpha | 0.10 |
|-------------|-------|
| Market coefficient | 0.52 |
| SMB coefficient | 0.18 |
| HML coefficient | -0.70 |
Assuming all estimated coefficients are statistically significant, which of the following is correct?
A risk analyst is evaluating an investment portfolio using the Fama-French three-factor model. The analyst regresses thirty years of weekly portfolio returns against the three factors of the model. The analyst obtains the following regression results:
| Alpha | 0.10 |
|-------------|-------|
| Market coefficient | 0.52 |
| SMB coefficient | 0.18 |
| HML coefficient | -0.70 |
Assuming all estimated coefficients are statistically significant, which of the following is correct?
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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.
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