a. Fama and French (1993) developed a three-factor asset pricing model. What are the three risk factors in the Fama and French three-factor model? (1.5 marks)

b. What risks the three factors can capture? (3 marks)

c. What stocks are described as value and growth stocks under theoretical framework of Fama and French (1993)? (2 marks)

d. Carhart (1997) extended the Fama and French three-factor model to a four-factor model. What is the fourth factor added to the Fama and French three-factor model? What does the fourth factor account for? How is the fourth factor estimated?