Question
Hype Research has identified two systematic factors that affect U.S. stock returns. The factors are growth in Robinhood trading accounts and changes in fast-food consumption.
Hype Research has identified two systematic factors that affect U.S. stock returns. The factors are growth in Robinhood trading accounts and changes in fast-food consumption. Robinhood trading account is expected to grow at 5%, and fast-food consumption is expected to increase by 3%. You are analyzing a stock that has a beta of 1.5 on the Robinhood trading accounts factor and 0.4 on the fast-food consumption factor. It currently has an expected return of 10%. However, if the trading account actually grows 8.5% and fast-food consumption drop 6%, what is your best guess of the stock's return?
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