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Q5. [20 points total] Consider the following information for Amazon with average monthly returns for four well-diversified portfolios. The monthly risk-free rate is 0.1%.
Q5. [20 points total] Consider the following information for Amazon with average monthly returns for four well-diversified portfolios. The monthly risk-free rate is 0.1%. The last column gives the estimates of the factor betas for IBM. Factor Portfolio Average Monthly Factor Return (%) Betas Rm-rf 0.54 0.612 SMB 0.15 -0.123 HML 0.43 0.144 PR1YR 0.70 0.256 (5a) Explain what the HML portfolio is, and why the portfolio empirically poses a challenge for the CAPM-model.
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Finance for Non Financial Managers
Authors: Pierre Bergeron
7th edition
176530835, 978-0176530839
