90.2K

Verified Solution

Link Copied!

Question Consider the returns of two active managed portfolios below (BTF & ETA) and three risk factors below 0.01% Exibit 1 Monthly excess returns for Portfolio BTF and ETA Period Portfolio BTF Portfolio ETA Factor 1 Factor 2 Factor 3 1 1.08% 0% -1.01% -1.67% 2 7.58% 6.62% 6.89% 0.29% - 1.23% 3 5.03% 6.01% 4.75% -1.45% 1.92% 4 1.16% 0.36% 0.66% 0.41% 0.22% 5 5 -1.98% -1.58% -2.95% -3.62% 4.29% 6 4.26% 2.39% 2.86% -3.40% -1.54% 7 -0.75% -2.47% -2.72% -4.51% -1.79% 8 -15.49% -15.46% -16.11% -5.92% 5.69% 9 6.05% 4.06% 5.95% 0.02% -3.76% 10 7.70% 6.75% 7.11% -3.36% -2.85% 11 7.76% 5.52% 5.86% 1.36% -3.68% 12 9.62% 4.89% 5.94% 0.31% -4.95% 13 5.25% 2.73% 3.47% 1.15% -6.16% 14 -3.19% -0.55% -4.15% -5.59% 1.66% 15 5.40% 2.59% 3.32% -3.82% -3.04% 16 2.39% 7.26% 4.47% 2.89% 2.80% 17 -2.87% 0.10% -2.39% 3.46% 3.08% 18 6.52% 3.66% 4.72% 3.42% -4.33% 19 -3.37% -0.60% -3.45% 2.01% 0.70% 20 -1.24% -4.06% -1.35% - 1.16% -1.26% 21 -1.48% 0.15% -2.68% 3.23% -3.18% 22 6.01% 5.29% 5.80% -6.53% -3.19% 23 2.05% 2.28% 3.20% 7.71% -8.09% 24 7.20% 7.09% 7.83% 6.98% -9.05% 25 -4.81% -2.79% -4.43% 4.08% -0.16% 26 1% -2.04% 2.55% 21.49% - 12.03% 27 9.05% 5.25% 5.13% -16.69% 7.81% 28 -4.31% -2.96% -6.24% -7.53% 8.59% 29 -3.36% -0.63% -4.27% -5.86% 5.38% 30 3.86% 1.80% 4.67% 13.31% -8.78% Required sume that the three factors represent the Fama-French three risk exposures, which one of these ee factors is most likely to be the Market risk premium from the regression output? Provide justification /4/ /4/ b. Assume that Factor 3 is the HML factor, which portfolio (BFT or ETA) is most likely to be a growth portfolio and which is most likely to be Value portfolio? /6/

Answer & Explanation Solved by verified expert

See Answer