Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases
A) large market capitalization and high book-to-market ratio
B) B. large market capitalization and low book-to-market ratio
C) C. small market capitalization and high book-to-market ratio
D) D. small market capitalization and a book-to-market ratio of 1.0
E) E. small market capitalization and a low book-to-market ratio

Question

Quizplus · Accepted Answer

According to the Fama-French three-factor model, stocks with small market capitalization and high book-to-market ratio tend to have higher returns.

Which One of the Following Combinations Will Tend to Produce