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2. True or False? Explain your reasoning. (a) You analyze GM monthly stock returns during the last 20 years. Suppose you do a regression on
2. True or False? Explain your reasoning. (a) You analyze GM monthly stock returns during the last 20 years. Suppose you do a regression on the three Fama-French factors, and you find that, whichever 3-year period you choose, the alpha of the regression is negative and significant. This would indicate that the 3 -factor model is not true. (b) A portfolio of value stocks will have a negative alpha under the CAPM (c) A portfolio of stocks with high returns over the past year will have a positive alpha under the Fama-French 3-Factor model. (d) Suppose you regress stock returns on the Fama-French 3 factors (market, size, value), and each time you do a regression, you get an R2 of at least 80%. This indicates that the Fama-French 3-factor model is the right model to price assets
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