The Fama-French three factor model includes the following factors:
A)beta, expected return on the market, risk free rate of interest, a size factor, and a value factor.
B)the market risk premium, a volume factor, and a size factor.
C)beta, expected return on the market, risk free rate of interest, a volume factor, and a value factor.
D)the yield on corporate bonds, a size factor, and a market factor.
E)None of the above.

Question

Quizplus · Accepted Answer

The Fama-French three factor model includes beta, expected return on the market, risk-free rate of interest, a size factor (small minus big) and a value factor (high minus low). B, C, and D are incorrect as they do not include all of the factors included in the Fama-French three factor model. E is incorrect as it is a false statement.

The Fama-French Three Factor Model Includes the Following Factors