1. In Portfolio Advice for a Multifactor World (http://faculty.chicagobooth.edu/john.cochrane/research/papers/ep3q99_4.pdf)

a) In what case did Cochrane suggest an individual investor would wish to hold securities that are sensitive to the business cycle? How would this investor differ from the average investor? Explain.

b) How does Cochrane suggest a way in which individuals could hedge against fluctuations in income from ones occupation? Explain.

c) The French and Fama factor model includes a factor to capture the returns on small capitalization stocks relative to large. What is Cochranes explanation for why the premium to this factor may disappear over time?

d) What is Cochranes approach to finding factors for which there may be enduring risk premiums?