You investigate the annualized monthly returns on a market (S&P 500) index fund and another smart beta fund and calculate the following statistics:

Mean Return Return Volatility

S&P 500 Index Fund 10.4% 16.1%

Smart Beta Fund 15.6% 18.9%

A regression of the smart beta fund on the Fama-French factors yields betas of 0.2 on the market excess return, 0.9 on SMB and -0.1 on HML. The average return of the SMB factor (E[SMB]) is 4% and the average return on the HML factor is (E[HML]) 5%. The annualized riskless rate has been 3% over your sample.

What is the Smart Beta Funds Fama-French 3-factor alpha?

	A.	3.02%
	B.	8.02%
	C.	5.02%
	D.	6.02%