[amp_mcq option1=”size of industry” option2=”size of market” option3=”size of company” option4=”size of portfolio” correct=”option3″]<\/p>\n
The correct answer is C. size of company.<\/p>\n
The Fama-French three-factor model is a model that describes the cross-section of expected returns on stocks. The model states that expected returns are determined by three factors: market risk, size risk, and value risk.<\/p>\n
The size factor is the second factor in the Fama-French three-factor model. It measures the size of a company, as measured by its market capitalization. The model predicts that small-cap stocks will have higher returns than large-cap stocks, after controlling for market risk and value risk.<\/p>\n
The size factor is one of the most robust factors in finance. It has been found to be significant in a wide range of countries and time periods. The size factor is also one of the most important factors for investors to consider when constructing a portfolio.<\/p>\n
The other two factors in the Fama-French three-factor model are market risk and value risk. Market risk measures the sensitivity of a stock’s returns to changes in the overall stock market. Value risk measures the sensitivity of a stock’s returns to changes in its valuation, as measured by its price-to-book ratio.<\/p>\n
The Fama-French three-factor model is a powerful tool for understanding the cross-section of expected returns on stocks. It has been used by academics and investors alike to explain the returns of stocks and to construct portfolios that outperform the market.<\/p>\n
The other options are incorrect because they do not measure the size of a company. Option A, size of industry, measures the size of an industry, as measured by its market capitalization. Option B, size of market, measures the size of the overall stock market. Option D, size of portfolio, measures the size of a portfolio, as measured by its total assets.<\/p>\n","protected":false},"excerpt":{"rendered":"
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