The Fama-French Three Factor Model Predicts the Expected Return on a Portfolio

question 33

Multiple Choice

The Fama-French three factor model predicts the expected return on a portfolio increases:

• A)linearly with its factor loading of the size factor.
• B)linearly with its factor loading of the volume.
• C)exponentially with its factor loading of the size factor.
• D)exponentially with its factor loading of the volume factor.
• E)None of the above.

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Definitions:

Lorenz Curve

A widely used graph of the distribution of income, with cumulative percentage of households plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis.

Lorenz Curve

A graphical representation of the distribution of income or wealth within a society, showing the degree of inequality.

Shaded Area

In graphical analysis, the region enclosed by curves or boundaries, often used to represent quantities such as surplus, deficit, or probability.

Transfer Program

Government policies designed to redistribute income in the society through mechanisms such as social security, grants, and subsidies to support the economically disadvantaged.