It is often said that the Fama French three factor model is a risk model. Explain why this might be the case.

15. Explain why the beta of a portfolio (or stock) doesn't matter under the Fama French three factor model? 16. Explain what is meant by the size effect.

17. Explain what is meant by the value effect.

18. Explain what is meant by the momentum effect

19. Explain what is meant by the capital market line

20. What is the expected return of a small cap value stock which has an exposure to the size effect (-2.25%) of 0.57 and an exposure to the value factor (3.55%) of 0.75, when the risk free rate is 2.75% and the ERP is 8.25%?

21. As per 20 above, except using CAPM and the variance of the stock is 0.0289, market standard deviation 18.65%, correlation 0.71.

22. As per 20 above, except using CAPM and the beta of the stock is 1.03

23. What does the stock's beta have to be for the above stock (Q20) to have the same return under CAPM and Fama French?