Question
Carhart (1997) extends the Fama French three factor model to a four factor model. That is, there are four factors in the markets, which are
Carhart (1997) extends the Fama French three factor model to a four factor model. That is, there are four factors in the markets, which are MKT, SMB, HML and UMD. The risk free rate is RF. You are given returns data for a stock, AAPL, from March 2002 to Feburary 2007, with a monthly frequency.
1) Please calculate the betas (exposures) of AAPL corresponding to these four factors. 2) How is the performance of the fourth factor UMD in explaining returns of AAPL.
| The data below have already been converted to monthly percentage. | ||||||||
| Date | AAPL | MKT | SMB | HML | UMD | RF | MKT-RF | APPL-RF |
| 200203 | 9.124424 | 4.47 | 4.35 | 1.09 | -1.7 | 0.13 | 4.34 | 8.994424 |
| 200204 | 2.533784 | -4.96 | 5.78 | 4.23 | 7.92 | 0.15 | -5.11 | 2.383784 |
| 200205 | -4.03624 | -1.05 | -3.69 | 2.37 | 3.05 | 0.14 | -1.19 | -4.17624 |
| 200206 | -23.9485 | -7.02 | 3.5 | 1.55 | 6.17 | 0.13 | -7.15 | -24.0785 |
| 200207 | -13.8826 | -8.11 | -5.11 | -3.7 | 3.41 | 0.15 | -8.26 | -14.0326 |
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Finance And Sustainability
Authors: Karolina Daszyńska-Żygadło, Agnieszka Bem, Bożena Ryszawska, Erika Jáki, Taťána Hajdíková
1st Edition
3030344037, 978-3030344030
