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You have a mutual fund that returned 11.5% for the year while the risk-free rate was 4%. The market beta for the fund was 1.2
You have a mutual fund that returned 11.5% for the year while the risk-free rate was 4%.
The market beta for the fund was 1.2 and the excess return on the market portfolio was
7%. Additionally, the risk premiums on the SMB and HML were 1% and 2%, respectively. The estimate of the risk factor sensitivities for the
SMB and HML risk premiums (i.e. their betas) are -0.8 and -0.3, respectively.
Did the mutual fund under or over perform based upon the CAPM?
Did the mutual fund under or over perform based upon the Fama-French 3 factor
model?
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