In Their 2010 Study, Fama and French Used a Four-Factor

question 10

Multiple Choice

In their 2010 study, Fama and French used a four-factor model to analyze excess returns on equity mutual funds. They found that the funds ________.

• A) had negative alphas before fees were considered
• B) had positive alphas after fees were considered
• C) had negative alphas after fees were considered
• D) had negative alphas before fees were considered and had negative alphas after fees were considered

---

Definitions:

Cognitive Conflict

A psychological state resulting from the confrontation of contradictory information, beliefs, or perceptions, which can lead to cognitive dissonance and the motivation to change one's thoughts or behaviors.

Assimilation

The cognitive process of fitting new information into existing cognitive schemas, perceptions, and understanding.

Accommodation

In cognitive psychology, the process of altering one's existing schemas, or ways of thinking, as a result of new information or experiences.

Equilibration

The process by which individuals balance assimilation and accommodation to create stable understanding in cognitive development.