Use the equation for the question(s)below.Consider the following factor specification:
E[Rs] - rf = (E[RMkt] - rf)+ E[RSMB] + E[RHML] + E[RPR1 YR]
-The term measures the sensitivity of the securities' returns to:

Question

Use the equation for the question(s)below.Consider the following factor specification:
E[Rs] - rf =  (E[RMkt] - rf)+  E[RSMB] +  E[RHML] +  E[RPR1 YR]
-The term  measures the sensitivity of the securities' returns to:

Quizplus · Accepted Answer

The term 11ead646_418a_78e6_93a1_fd2fdf396b19_TB7031_11 measures the sensitivity of the securities' returns to the overall market, which is represented by the market risk premium (E[RMkt] - rf). This is a common factor used in the Capital Asset Pricing Model (CAPM) and other asset pricing models.

Use the Equation for the Question(s)below