Question
Q1. Consider a two-factor model, with factors E and F. A factor portfolio (i.e., a factor mimicking portfolio)for factor E has the following properties (select
Q1. Consider a two-factor model, with factors E and F. A factor portfolio (i.e., a factor mimicking portfolio)for factor E has the following properties(select all that you think are correct):
it has a beta of one on E
it has a beta of zero on E
it has a beta of one on F
it has a beta of zero on F
it is well-diversified
it is not necessarily well diversified
Q2. Which of the following factors were used by Fama and French in their multi-factor model?
Return on the market index
Return spread between small and big stocks
Return spread between high book-to-market stocks and low book-to-market stocks.
All of the above factors were included in their model.
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