You have estimated the Fama-French 3-factor model for Nike (NKE) stock:

	Coefficients	Standard Error	t-Stat	P-value
Intercept	-0.0044	0.0085	-0.5125	0.6103
MKT-RF	1.1474	0.1596	7.1871	0.0000
SMB	-0.4528	0.3043	-1.4884	0.1423
HML	-0.1081	0.1779	-0.6073	0.5461

The risk-free rate in the economy is 4%.

1. (1 point) Determine whether NKE is a cyclical, defensive, or hedging stock against the market risk. Why?
2. (1 point) Determine whether NKE is moving like a small-cap stock or a large-cap stock. Why?
3. (1 point) Determine whether NKE is moving like a value stock or a growth stock. Why?
4. (1 point) Determine whether NKE outperforms or underperforms its 3-factor benchmark. Why? Is the number supporting your inference statistically significant at the 10%, 5%, or 1% threshold?
5. (1 point) Currently, the market risk premium is 6%, SMB is 2%, and HML is 3%. What is the expected return on NKE according to the Fama-French 3-factor model?

Answer rating: 100% (QA)

1 To determine whether NKE is a cyclical defensive or hedging stock against the market risk we can examine the coefficient of the MKTRF market risk pr... View the full answer