Use the Fama-French Three-Factor model augmented by Momentum(MOM) to estimate the expected returns of each of the funds from part 2:

• European stock fund: Fidelity Europe (FIEUX)
• Latin America Fund: Fidelity Latin America (FLATX)
• Long-term bond fund: Fidelity Corporate Bond (FCBFX)
• Real Estate fund: T. Rowe Price Real Estate (TRREX)
• Small Cap Stock Fund: Fidelity Small Cap Stock (FSLCX)

To simplify notation in the regression notice that = is stock or portfolio excess return and = is the excess return on a stock market portfolio

In order to do this follow 3 simple steps:

1. Step 1. Estimate the risk premia for each factor

2. Step 2. Estimate the sensitivities of the stock to each of those factors.

3. Step 3. The expected returns can be calculated by combining the results of the previous steps.

4. Which fund has the highest and lowest expected return?
5. Compare the factor betas and provide some comparisons between the two funds.

Now, use the Fama-French 5-Factor model below to estimate each of these funds expected returns

To simplify notation in the regression notice that = is stock or portfolio excess return and = is the excess return on a stock market portfolio

In order to do this follow the same procedure as before.

6. Step 1. Estimate the risk premia for each factor
7. Step 2. Estimate the sensitivities of the stock to each of those factors.
8. Step 3. The expected returns can be calculated by combining the results of the previous steps.
9. Which fund has the highest and lowest expected return?
10. Compare the factor betas and provide some comparisons between the two funds.
11. Which model is better to calculate the factor betas?