Briefly Discuss How You Would Use the Fama-French Three-Factor Model

question 15

Essay

Briefly discuss how you would use the Fama-French three-factor model to estimate the cost of equity for a firm.

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Definitions:

Scatter Diagram

A graphical representation using dots to show the relationship between two variables, often used to identify patterns or trends.

Nominal Variables

Variables classified into categories that cannot be ordered or ranked; they are used to label or name categories or groups.

Relationship

The manner by which two or more ideas, items, or individuals are linked, or the condition of linkage.

Scatter Diagram

A graph that shows the relationship between two variables by displaying data points on a two-dimensional plane.