Which of the Following Variables Do Fama and French Claim

question 46

Multiple Choice

Which of the following variables do Fama and French claim do a better job explaining stock returns than beta?
I. Book-to-market ratio
II. Unexpected change in industrial production
III. Firm size

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Investment Opportunity

A potential situation where an individual or organization can invest capital with the expectation of achieving a return.

Profit Center

A business unit or division that is responsible for generating its own revenue and profit, with its financial performance being tracked separately.

Investment Center

A segment or area of a business responsible for its own revenue, expenses, and assets, and its performance is measured by its return on investment.

Fixed Expenses

These are costs that do not change with the level of production or sales, such as rent, salaries, and insurance.